Syscoin, one of the oldest blockchain platforms in the world, has been accused of an ongoing conspiracy to manipulate the SYS token supply and allegedly defraud investors through Syscoin Foundation.

The project, which started in 2014, said it wanted to combine the best features of Bitcoin and Ethereum. It promised a solid platform for decentralized applications. In 2018, it set up the Syscoin Foundation to support and develop the platform.

Syscoin accused of fraud

According to a new report filed by the Dogecoin Foundation, serious misconduct is suspected within the Syscoin Foundation and SYS Labs Holding Ltd. The entities are reportedly under investigation for possible financial crimes. 

Directors Jagdeep Sidhu, Willy Ko, Christopher O’Shea, Michiel Naring, and Bradley Stephenson are accused of issuing 100 million new Syscoins without proper authorization. A source told Cryptopolitan:

“It was a hostile move with the intent to dilute the token supply and cover up financial mismanagement.”

The issuance of these new tokens was allegedly disguised as a legitimate community vote. Christopher O’Shea, using the alias “BigPoppa,” posted a proposal supposedly ratified by the community. 

However, there are serious doubts about the authenticity of this vote. It’s alleged that the vote was either faked after the fact or conducted in secret, excluding most of the community.

The Syscoin Foundation claimed that these new tokens will strengthen the foundation’s treasury and support the ecosystem.

But Dogecoin Foundation alleges that the funds were funneled to SYS Labs, so that the directors can get rich quick while leaving the foundation and its investors shortchanged.

João Fernandes, head of business development at Rollux, reportedly proposed redirecting Syscoin’s masternode governance budget towards the Rollux project. 

Dogecoin Foundation said initially, Rollux was developed and funded by the Syscoin Foundation. But when the project reached a certain stage, it was moved to SYS Labs, increasing its value and the personal stakes of the directors by a big margin.

Authorities get involved

The situation has caught the attention of Dutch authorities, leading to a criminal investigation. The Functional Public Prosecutor’s Office is reportedly looking into potential financial crimes, including theft, embezzlement, fraud, forgery, and money laundering. 

The fallout from these actions has been severe for Syscoin investors. The issuance and sale of 100 million coins caused the token’s value to plummet, according to the claims. 

The Dogecoin Foundation’s report also accuses the directors of never filing a corporate tax returns, saying:

“Intentionally failing to file a corporate income tax return or filing an incorrect return constitutes a criminal offense pursuant.”

This is reportedly a criminal offense under Dutch laws.

CEO debunks claims of stepping down

On July 25th, Decrypt put out an article that said Jagdeep Sidhu was going to resign amid the heating allegations. The report said this was so he could form a new entity called ‘Syscoin Red.’ Willy Ko had said that:-

“The foundation’s treasury wallet is not a multi-signature wallet. I have raised concerns about the lack of transparency on using the foundation’s funds.”

Matthew Mappin, former business development manager at SYS Labs, also reportedly told Decrypt that the community has raised major concerns with the directors several times about the “lack of financial transparency, the obscure relationship between the Syscoin Foundation and SYS Labs.”

The very same day, Sidhu took to Twitter to say that the reports of him leaving Syscoin are untrue. He called Decrypt’s article a FUD attempt.

O’Shea, meanwhile, told Decrypt that, “Treasury funds are held in a cold wallet, and on a monthly basis, an amount is transferred to a hot wallet to cover operational and ecosystem expenses.”