[Proposal 952][PASSED] Declaration of No Confidence in ICF Leadership & Call to Action

Hub Proposals Signaling/Text
1

Change Log

  • 08-2024-06: Initial post created: "Declaration of NO Confidence in the ICF, Petition for Comprehensive Audit
  • 08-2024-12: Keep “no confidence.” In lieu of petitioning the FSAF directly, make it a contingency measure. Directly engage the ICF to produce summary reports based on annual “examinations” the foundation claims are comprehensive in scope. Future reporting requirements also added to text of proposal.
  • 08-2024-13: Removed “Future Reporting Requirements”
  • 08-2024-20: Revised Call to Action to include request for Comprehensive Annual Reports, 2017-2023; reserve direct petitioning to FSAF as a contingency measure in the event Reports are not delivered within 60 days.
  • 08-2024-21: Added proposal translations in Chinese (Simplified, Traditional), Russian, Korean, Japanese, French
  • 08-2024-22: Added Summary and Links

DECLARATION OF NO CONFIDENCE IN THE INTERCHAIN FOUNDATION LEADERSHIP: A CALL TO ACTION

The proposal is available in the following languages:

Simplified Chinese
Trad Chinese
French
Korean
Japanese
Russian

Summary

This proposal calls for a vote of no confidence in the ICF leadership, grounded by serious concerns over governance failures, undue influences, neglect of purpose and duty.

Whether established or new, leadership needs awareness if it is to be accountable for the legacy, reputation, and future it stewards. No confidence sends a clear zero-tolerance message to the ICF Foundation Council about where they stand, reasons why, and what must be rectified.

However, this proposal is not an indictment; it’s more importantly, a decisive call to action.

An opportunity for stakeholders to assert constructive asks utilizing reasonable demands and timelines to achieve the transparency that previous calls for accountability failed to secure.

A YES vote for this proposal means signaling support for:

  • A demand for Comprehensive Annual Reports for fiscal years 2017-2023 within 60 days.
  • Specific guidelines for the content and structure of these Reports.
  • Contingency measures, such as directly petitioning the Supervisory Authority (FSAF) to pursue an audit on the ICF, if needed.

Links:

Full Text
Audit Scope Reference Document
Translations: Chinese (Smpl, Trad), Korean, Japanese, Russian, and French

1. Preamble

1.1 ESTABLISHMENT

WHEREAS, the Interchain Foundation (ICF) was established on March 07, 2017, as a Swiss foundation (Stiftung) under CHE-199.569.367; and

1.2 LEGAL CONTEXT

WHEREAS, pursuant to Swiss law, a Stiftung may be formed solely for a specific, not-for-profit purpose and is subject to regulatory supervision by the Federal Supervisory Authority for Foundations (FSAF/ESA); and

1.3 MANDATED PURPOSE

WHEREAS, the ICF’s mandated purpose is “promoting and developing new technologies and applications, especially in the fields of new open and decentralized software architectures. A dominating but not exclusive focus is set on the promotion and development of the Cosmos Network, the Polkadot Protocol and the related technologies as well as to conduct the necessary fundraising”; and

1.4 FUNDRAISING

WHEREAS, the ICF conducted an ICO for ATOM in April 2017, raising $17 million, to fund its endowment; and

1.5 ATOM ALLOCATION

WHEREAS, the ICF was given 20,277,188.49 ATOM, 10% of the Genesis supply, with the mandate to use these tokens for the interconnected purposes of the Cosmos Plan and its mandate established via charter; and

1.6 BENEFICIARIES

WHEREAS, ATOM ICO investors, token holders, validators, developers, and contributors who participate in Cosmos Hub governance are general beneficiaries of the ICF’s activities, and hereafter collectively referred to as “stakeholders”; and

1.7 FIDUCIARY DUTY

WHEREAS, the ICF’s ongoing fiduciary duty is evidenced by two key events: the ICO of ATOM tokens and the subsequent allocation of ATOM tokens at Genesis; and

1.8 RESPONSIBILITY

WHEREAS, the ICF bears the key responsibility of coordinating distributed development for decentralized Cosmos architectures, necessitating efficient resource allocation, good governance, legal compliance, and stakeholder engagement; and

2. Grounds for No Confidence

WHEREAS, the grounds for the declaration of no confidence and the “Call to Action” include, inter alia:

2.1 DEVIATION FROM MANDATED PURPOSE

WHEREAS, prima facie evidence suggests deviation and/or impermissible mutation of the ICF’s mandated purpose; and

2.2 BREACH OF FIDUCIARY DUTY

WHEREAS, the ICF has observably failed to uphold its fiduciary duties to ATOM investors and the Cosmos Hub, demonstrating indifference to the vital support ATOM still requires; and

WHEREAS, the failure to prioritize ATOM, despite having received ATOM, BTC, and ETH tokens to fund its endowment and key activities, represents a fundamental breach of trust, dereliction of purpose and core responsibilities; and

2.3 GOVERNANCE FAILURES

WHEREAS, lack of competence and expertise in foundation management has led to governance deficiencies indicated by:

a. Allegations of anti-competitive practices and abuse of dominant position by members of the Foundation Council (FC), potentially violating applicable competition laws and undermining principles of fair governance;

b. Governance instability highlighted by the resignation and replacement of two FC Presidents within an eleven-month period;

c. Inadequate checks and balances, and ineffective oversight mechanisms; and

2.4 CONFLICTS OF INTEREST

WHEREAS, unmitigated conflicts of interest impair critical functions in resource allocation and decision-making, particularly affecting grants, vendor agreements, investments, and token delegations; and

2.5 LACK OF TRANSPARENCY AND ACCOUNTABILITY

WHEREAS, the ICF claims comprehensive statutory reporting to the FSAF, including “ordinary audits,” but the confidentiality of these filings prevents stakeholder verification; and

WHEREAS, despite the ICF’s compliance with Swiss reporting requirements, its nearly eight years of non-disclosure and obfuscation have resulted in significant information asymmetry, demonstrating a failure to fully meet its transparency and accountability obligations to stakeholders; and

WHEREAS, this deliberate withholding of information appears strategically aimed at frustrating stakeholder demands for reform, creating systemic information barriers that disadvantage stakeholders and threaten the long-term viability of the Cosmos Hub and Cosmos project; and

2.6 FINANCIAL MISMANAGEMENT

WHEREAS, the ICF has shows signs of imprudent Treasury management, with funding disruptions likely stemming from poor risk management, diversification, and liquidity strategies; and

WHEREAS, the ICF’s asset reporting fails to meet reasonable disclosure standards; and

WHEREAS, the ICF’s failure to provide stakeholders with timely, comprehensive reports on significant asset changes and management strategies undermines accountability and breaches its fiduciary duty as a not-for-profit purpose foundation; and

WHEREAS, there are concerns about potential misuse of funds, including allegations of misappropriation and embezzlement, which, if proven, would violate civil and criminal laws; and

2.7 EROSION OF STAKEHOLDER TRUST

WHEREAS, all of the above enumerated concerns extend beyond ethical considerations and/or violations of the ICF charter, but may also possibly contravene Swiss Civil Code, Swiss Code of Obligations, Swiss Criminal Code, and Swiss Foundation laws; and

WHEREAS, these urgent issues necessitate immediate and decisive stakeholder action;

3. Call to Action

NOW, THEREFORE, We, the stakeholders of the Cosmos Hub, being duly empowered and justified by the foregoing, do hereby resolve to address the ICF’s systemic failures through the following:

3.1 DECLARATION OF NO CONFIDENCE

We hereby DECLARE formally our vote of no confidence in the ICF Foundation Council (FC) leadership;

3.2 PETITION FOR COMPREHENSIVE ANNUAL REPORTS

We hereby PETITION the ICF to publish Comprehensive Annual Reports (hereinafter “Reports”) for fiscal years 2017-2023, as follows:

3.2.1 Individual Reports for each fiscal year; no consolidated Reports.

3.2.2 Each Report shall include:

a. All financial and operational information necessary to understand ICF’s activities and programs

b. A reference to the appended Audit Scope Reference Document, which confirms:

  • Areas included in the audit
  • Areas not covered and why
  • Alternative evaluation measures for uncovered areas

c. Relevant audit findings, as deemed appropriate by ICF

d. Additional information for comprehensive understanding of ICF operations.

3.2.3 In cases where certain information cannot be disclosed due to confidentiality constraints, the ICF shall:

a. State the nature of the information that cannot be disclosed

b. Provide the legal/regulatory basis for non-disclosure

c. Offer any permissible summary or redacted version of the information that can be shared.

The above-described reporting structure defines the desired scope for the requested Comprehensive Annual Reports.

Including relevant audit findings, as deemed appropriate by the ICF, further enhances transparency while maintaining necessary confidentiality.

3.3 TIMELINE FOR DELIVERY

We CALL FOR the Reports be published within 60 days of this proposal’s passage.

3.4 CONTINGENCY MEASURES

We ESTABLISH:

3.4.1 In the event Reports are not delivered within 60 days, the stakeholders will petition the FSAF directly for an appropriate audit.

3.4.2 If discovered that the ICF has misrepresented the scope of its annual audits, stakeholders will report the misrepresentation and petition the FSAF for an audit and investigation, irrespective of the 60-day waiting period.

3.5 AFFIRMATION OF INTENT

We AFFIRM this action aims to realign the ICF with its mission and restore stakeholder trust.

4. Voting Options

YES - Expresses no confidence in ICF leadership and supports the petition for reports and potential FSAF involvement.

NO - Does not approve this proposal.

ABSTAIN - Contributes to quorum without voting for or against.

NO WITH VETO - Indicates the proposal is spam, infringes on minority interests, or violates governance rules. If exceeding 1/3 of total votes, the proposal is rejected and deposits burned.

24 Likes
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I am in strong support of this proposal.

It is a needed step.

The code I used to count the Bitcoin and ether is here:

Another item that I want to mention, is to ATOM holders. Please do not wait for your validator to vote on this. Most validators get delegations from the ICF, and the pressure they are under is very real.

I should also note that proposal 787 has not been complied with by the foundation.

Governance can’t compel the foundation to do much these days, even fund $atom.

So I view this as a 100% necessary step.

10 Likes
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To provide perspective on what reporting looks like in other ecos, have a look at web3 foundation’s H1 2024 report.

This report includes not only direct spending details but also a comprehensive income statement and balance sheet, providing a complete inventory of all digital assets in their Treasury.

In contrast, consider the ICF’s truant and incomplete approach to reporting. Their article wrt 2024 funding was published in Dec 2023, concluding with a promise to deliver the 2023 annual report in “early” 2024. It’s August 2024.

Where’s the 2023 annual report?

Done waiting. Just petition the relevant supervisory authority (FSAF) to exercise oversight and audit the ICF.

4 Likes
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Key changes have been made to foundation law in Switzerland. The new laws went into effect this Jan 2024. $ATOM tokenholders may qualify as recognized “beneficiaries” and can submit requests to investigate/audit directly to the Federal Supervisory Authority of Foundation (FSAF).

4 Likes
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Therefore the amount of individual wallets voting is way more crucial than validators voting with sleeping staked atoms by people who don‘t participate in governance.

I would say.

3 Likes
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Correct. Although it’s impossible to authenticate distinct users. The number of accounts participating is a factor.
But everyone’s voice matters.

3 Likes
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Disclaimer: I write this reply in my personal capacity in light of my personal views, and not in the name of or as a representative of the dYdX Chain team, or any client represented by Axis Advisory.

Hey everyone,

Joseph here (Immutablelawyer), founder and general counsel at Axis Advisory, also a contributor to ArbitrumDAO and a Supervisor of the dYdX Operations Foundation.

For the most part, our team has always taken the decision to omit from contributing to the Cosmos Ecosystem due to the blatant mismanagement of the various initiatives that were spun up over time. These have naturally served as a disincentive for us to allocate time, resources and human capital to this ecosystem. This mismanagement spans various areas including (but not limited to):

  1. Blatant conflicts of interests w/several initiatives re. their fund deployment;
  2. Lack of adequate oversight that is to be expected from an ecosystem such as Cosmos;
  3. Lack of the ability for DAO oversight given the opaque nature that several initiatives (including the ICF) have operated with;
  4. Mismanagement of contractual relationships and non-disclosure of agreements to the Cosmos Ecosystem (by using Cosmos Ecosystem funds).
  5. [The list goes on]

The details mentioned above make it seemingly difficult for the Ecosystem to attract new contributors (be it builders, governance participants and even validators). This has naturally resulted in the depletion of the talent pool that the Cosmos Ecosystem once had.

It’s crucial, pivotal even, for the Cosmos Ecosystem to implement mechanisms that ensure proper accountability and transparency across all its initiatives, particularly with the Interchain Foundation (ICF). The lack of transparency and accountability at the ICF, as highlighted in the proposal, has not only led to negative perceptions but has also set a dangerous precedent that could encourage similar behavior in other parts of the ecosystem. This is unacceptable for an ecosystem that prides itself on being supposedly decentralized and community-driven.

In our opinion, the ICF (as a non-profit key stakeholder of this ecosystem) has a fiduciary and ethical duty to uphold the principles of transparency, integrity, and accountability. This duty extends to its financial management, governance practices, and overall decision-making processes. The proposal’s call for a comprehensive audit by the Federal Supervisory Authority for Foundations (FSAF) is not just a necessary step towards rectifying these issues but also a move to restore trust within the community.

The detailed scope of the proposed audit—ranging from financial management to governance structure and internal controls—highlights the depth of concerns and the need for an independent evaluation.

It’s also important to recognize that the consequences of mismanagement at the ICF go beyond immediate financial or operational concerns. They impact the long-term sustainability and reputation of the entire Cosmos Ecosystem. As we move forward, we must prioritize creating an environment where ethical governance and transparency are non-negotiable standards, not opt-in standards which are optional in nature.

In conclusion, the proposal to declare no confidence in the current leadership of the ICF and to request an audit is a crucial step towards realigning the foundation with its mission and restoring community trust. I strongly support this proposal and urge the community to vote ‘YES’ to ensure that the necessary reforms are implemented, and that the ICF can once again be a trusted steward of the Cosmos Ecosystem.

Personally, I look forward to seeing this implemented. I’ll definitely be keeping abreast with any further updates here.

Regards,
Joseph
Axis Advisory

13 Likes
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We completely support the call for increased transparency within the ICF. As a validator receiving delegations from the ICF, we are acutely aware of the potential conflicts of interest we have, but nonetheless always strive to operate our business based on ethics and with a duty to the communities/projects we support. An audit does not necessarily entail extreme negligence, but can uncover areas for improvement.

While we are grateful for the support and trust placed in us by the ICF, we also believe that transparency and comprehensive audits are crucial for maintaining the integrity of the ecosystem. Our intention is not to be combative but to ensure that our community remains strong and united.

We hope that this proposal can lead to constructive dialogue and positive changes that will benefit the entire Cosmos ecosystem.

11 Likes
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Indeed. It isn’t even safe to contribute to core repositories on matters of security, and reports are more likely to be ignored with derision from ICF funded teams than addressed.

So I stopped.

And I said that only people and process change would allow me to ever continue.

Based

4 Likes
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Hello @Cosmos_Nanny,

I understand that this proposal aims to restore the confidence of the Cosmos community by ensuring that the ICF operates transparently, ethically, and in alignment with its mandated objectives.

However, the proposed audit seems to fall into a culture of diagnosis and fatalism. We will end up with scores or “horoscopes” for the organization, which will not effectively restore trust.

I ask that you consider the following:

  1. Review the Core Objective:
  • The objective is not clearly stated. What do you truly aim to achieve with this proposal?
  • A more macro-level objective would be far more beneficial, and the audit is just one operational action to achieve this goal.
  1. Reevaluate the Approach:
  • If the goal is to restore trust, an audit is not the right approach.
  • I am disappointed by such a trivial response. Scores and organizational horoscopes will never effectively rebuild trust.

Thank you for considering these points to improve the proposal.

3 Likes
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Julien,

Do you have the 2023 ICF annual report?

If so could you share it with us?

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Does the ICF do anything else other than dump ATOMs all day?

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Yes. They make certain that informal systems gets paid, quash security reports and push contributors out of the ecosystem.

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I wish I could share the 2023 ICF annual report with you. Unfortunately, it’s currently buried somewhere between my misplaced confidence and my hopes for a brighter future.

Seriously though, I agree with you on the importance of a report. However, an audit isn’t necessary to achieve this level of bureaucratic normalization. Here, we’re talking about the management of an institution. We need clear roadmaps and objectives, like you said issuing an annual report. And you’re right, and I agree.

The real question is the management of this institution. Expectations should be driven by the interests of the stackers, similar to an independent administrative authority in France.

It’s about management, and a piece of paper doesn’t manage anyone. You know management, don’t you, @jacobgadikian?

1 Like
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Then why don’t reports come on time?

Pretty sure this is what audits are for.

1 Like
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I partially agree with Julien that an audit in itself doesn’t really solve much with regards to the perceived mismanagement of the ICF. Who/what has the teeth to do anything beyond that?

For all we know, the newest hires could already be working on internal reform, but the public is generally unaware of their initiatives. I suppose that’s generally in line with what we’ve come to know from the foundation.

Ultimately, if this goes on chain and spurs further reform and/or produces the needed comms that the public desires, it’s probably a win for all. Time to get this all behind us.

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That’s the point of this. We know nothing.

4 Likes
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Yeah, I get that lol.

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I disagree. We cannot rely on the same individuals who have brought the ICF to its current state to implement the necessary changes. Before we can start building a new roadmap, we must address the underlying issues that continue to plague the ecosystem. An audit will provide the community with crucial insights into the culture of the ICF and identify what steps are needed moving forward. This audit also serves as a statement from the community, emphasizing that the community’s concerns matter and setting a precedent for future leadership. The real question is, what are you afraid of?

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We’re all saying the same thing, bordel de $newt.

We’re definitely going to find skeletons in the closet. But what comes next? What is the meta plan? Who is the executive body to make decisions after this audit?

We’re missing an entity that can take decisive actions post-audit.

The audit is a key piece in a much larger plan that someone like Nanny could orchestrate. The audit is useful, but it’s just a step.

2 Likes