But you refer earlier to the community and giving them time for pro’s and con’s. I don’t get it. Sorry. I think there was enough time for all to give comment. Who’s in now able to make things happen?
During the last community call, there was a general alignment that 1754 Factory should engage North Lakes Legal directly for purpose of the legal review. This engagement has not yet occurred. 1754 Factory and I are tentatively scheduled to speak after June 25th.
Other than this, I do not have anything to report in terms of legal review or otherwise.
Does it mean that Centrifuge is not interested to participate in this legal review?
I look forward to the results of your June 25 meeting with Mr. Dureil.
However, the concerns you highlight with the 1754 Factory asset pools also are also the responsibility of Centrifuge.
Centrifuge onboarded - and thereby implicitly endorsed - 1754 Factory. I would venture that this endorsement led many senior tranche holders to invest in the Branch Series asset pools. Centrifuge owes it to these investors to fund your assessment.
Further, this assessment is vital to the reputation of Centrifuge - and will hold important lessons for its business model.
Dickering now over who will pay will only delay what all agree needs to be done quickly.
Centrifuge should cover the cost; it can try and get Mr. Dureil to pitch in. Let’s not delay a vote on this assessment any further.
Totally agree. Contracting should come from Centrifuge. 1754 should only respond to questions and open the books. As this entity is in doubts you never even should discuss a contractual engagement of the same. Have never seen such an approach.
Does it mean that Centrifuge is not interested to participate in this legal review?
Centrifuge should cover the cost;
Contracting should come from Centrifuge.
This topic was discussed during the Governance Call #16 and Governance Call #17 , and the general agreement was that the Issuer should pay for any legal review.
All 1754 investors signed the legal agreement during the onboarding, and the issue with the 1754 pool affects only these investors of one of the specific pools and not all onboarded investors/pools on Tinlake/Centrifuge App.
Please note, that with the approval of all token holders, the Founding Document Centrifuge became the DAO. The spending of any DAO funds should be agreed upon through a collective vote by all token holders.
Any token holder can initiate an RFC and request funds from DAO to cover this legal review in accordance with Centrifuge Governance Framework. If the on-chain voting will be approved via a Democracy Proposal by all token holders, the author of the proposal (/1754 investors) will receive the funds to pay for the legal review.
If you need any help or assistance with this proposal, feel free to contact the Governance and Coordination Group.
A governance call doesn’t substitute doing the right thing nor might it be representative. It seems there’s no real interest from Centrifuge team to go onto the ground of this serious issue with Factory. At the end of the day, it is our, Centrifuges’s, reputation of how we handle these kind of issues. And I understand that this is not of our business but sometimes there’s exception to the “obligations” (I personally think it is our obligation as we introduced Factory to our community). And we all know where this ends. 1754 investors wait for the 25th and they hopefully won’t wait for Godot.
The Centrifuge team should initiate the legal review here or at the very least initiatie the proposal that asks for DAO funding, if its not done directly by the team. 1754 was one of the first pools on Centrifuge and it that has been advertised a lot. The team enticed people to invest in the pools and thereby implicitly endorsed the issuer. The team is not responsible for the damages from the Sherwood impairment, but they do have a responsibility to do everything in their power to resolve this situation in the best way possible. Everything so far feels very passive. Both on actions and communication.
The issuer appears to be at the very least lacking. So giving him control of the legal review process wouldn’t be neutral and could possibly make things worse.
Do we know anything from Sherwood? Is anyone in contact with them? Why are we relying on Davoa when they have so far demonstrated that their word is inaccurate at best, possibly misleading. How do we know the issue does not lie with Davoa or Davoa’s communication with Sherwood?
Does anyone know the actual impairment that Sherwood as an entity has? Aka, how much can we get out of Sherwood to begin with? Months have passed and we know nothing. No details. Just empty promises.
This post is on behalf of Centrifuge Network Foundation (CNF) on the matters around 1754 Factory and the role of the Centrifuge protocol and DAO in this matter.
The delays and potential default of 1754 Factory pools is not just unfortunate but also directly affects CNF. CNF is the single largest investor in the Branch pool and also has significant exposure to Bling. As such the issues in 1754 Factory affect CNF very directly and we are working towards the best possible outcome for all creditors in this pool. However as a creditor to 1754 Factory, we do not believe a legal review is the right next step and in our (and probably all other creditors) best interest.
On the matter of the protocol and some of the requests in this thread to ask for a “Centrifuge funded” legal review: It is important that we separate the protocol from this. Centrifuge is an open platform and anyone is free to launch a pool within the governance procedures agreed by the DAO - all of the code is open source. The process of pool launches has always been transparent; issuers go on the forum, explain what their pool is about in the forum. The DAO has evolved and improved on this process by requiring a token holder vote and created the credit group.
However an important fact is that the DAO isn’t a direct counterparty in this matter. The Centrifuge protocol is a technical platform and not contractual counterparty to a transaction. As such a legal analysis of the pool by a DAO appointed (and possibly funded project) doesn’t have any rights or ability to change anything about the current situation. Instead the investors need to come together and decide whether or not to start legal proceedings either individually or collectively as would be the case in any bond offering.
The next step that 1754 creditors have is to form a creditor committee in order to agree on coordinated action. This committee could hire counsel and proceed with legal actions. As a creditor to 1754 Factory, CNF will reach out to other investors privately to discuss forming the creditor committee. Please don’t hesitate to reach out to me about this in forum DMs if you are an affected creditor.
Please note that as it may concern litigation the proceedings of the creditor committee will need to be confidential. To the extent the committee takes public actions or public information becomes available to CNF, we will share this on the forum.
All of this is logical, and receiving such information earlier would have been beneficial saving time and energy. In this situation, the only way to move forward is by forming a creditor committee, or even individually in the case of CNF.
However, it is confusing why an audit review, which was suggested by NLL, is not considered the appropriate course of action. What could be better than having clarity from both sides? As a Factory entity, if you have nothing to hide, you should openly embrace such an approach to maintain a positive relationship with Centrifuge.
Wish you luck with the next steps!
From the get-go, I will acknowledge my potential conflict as my proposal triggered the discussion.
Be that as it may, I would like to understand why a legal review is not the “right next step”? Typically a legal review would determine what rights and remedies the creditors may (or may not) have based on specific facts and circumstances. A legal review can also uncover improvements for subsequent transactions.
Also, what is meant by “we are working towards the best possible outcome for all creditors in this pool”? What steps are being taken?
While I understand this point, it seems that transparency and openness needs to occur at all stages … even if things get sour.
I believe this legal review is not only necessary but an absolute must. Fabien repeated provision of false timelines has led me to suspect that something is happening behind the scenes, causing him to prolong the issue, especially considering the first assets in Branch 3 have reached maturity but have not been repaid, despite his repeated assurances of normal operations and timely repayments. While we can accept losses in our investment, we cannot tolerate being scammed. that’s why transparency is desperately needed during this time. It has been almost 300 days overdue without a single repayment, which is significantly prolonged.
Exactly. The longer Centrifuge doesn’t take full control on this with transparent actions the harder it will be for “small or retail investors” trusting our platform. I am not sure if this is in the interest of the community leaving this end lose as such. Currently it makes that impression.
Thanks for engaging with the DAO on this matter.
To clarify Lucas’ post, there are 2 different things which are being mixed up and conflated: a legal review of 1754 issuance by a DAO-appointed counsel (your proposal) and a legal assessment of the rights of the 1754 creditors by counsel to the creditor committee.
CNF’s view is that the first proposition will not lead to specific actions on behalf of the creditors. As stated by Lucas: a DAO-appointed counsel doesn’t have any rights or ability to change anything about the current situation.
Your statement that a legal review that would determine what rights and remedies the creditors may (or may not) have based on specific facts and circumstances is indeed useful but this needs to be undertaken by the creditors and their appointed counsel.
As I am sure you appreciate, maintaining attorney-client privilege is critical especially as counsel’s advice will necessarily cover litigation strategy. Privilege is tied to the client and its engagement with counsel.
For this second type of legal review, it is premature at this time. The creditor committee is not yet formed, has not yet met nor appointed legal counsel. It may be that the committee decides on this step in due course, but it has not occurred as of this time.
More generally, I wonder whether NLL could contribute to the community in a forward-looking way such as helping the Credit Group with reviews of pools prior to launch? I am sure the DAO would value such input.
@Eli - Thanks for the clarifications.
Always happy to provide assistance.
The problem, as articulated by Lucas, was clearly understood. CNF, either independently or in collaboration with other creditors, should take proactive measures in their own interest and for the benefit of Centrifuge’s platform when it comes to CNF. It is imperative that someone takes the lead, and CNF seems to be the appropriate candidate.
However, I’m uncertain about the timeline of the issue—did it originate in November 2022? If so, why has there been such a lengthy delay? Maybe I am overlooking a crucial detail?
We need to be aware that smaller investors feel scared by such an event which might be “daily business” for professional investors. At the end of the day, I assume CNF as well as the community has learned a lot by this situation and now we need to “clean up our house” properly.
As a creditor of both Branch series 1 and series 3, I would like to join this committee and get more pressure behind this. This should have been done much earlier in my opinion. I do not mind contributing to legal action at all, I just want to make sure the right actions are being taken. Time can be very important in these matters.
Some clarifications that would be helpful:
Why is Fabien not responding anymore?? Not here, not by mail, and not on telegram. Will he be part of the committee? Or is he also a party that can be litigated by the committee?
Do we need to worry / be proactive about Branch Series 3. Since that is also managed by the same issuer, Davoa? Or is there no issue with the issuer itself and no issue with the counterparty to Branch Series 3?
Is there any ongoing litigation or is everything dependent on this committee initiating active litigation against Sherwood?
Has anyone talked directly to Sherwood? Anyone outside of Fabien/Davoa? Who seems to have gone missing in action suddenly and, at least optically, hasn’t seemed very effective so far. Do we know anything about Sherwood’s finances?
This post is to provide an update and respond to questions.
The 1754 Factory Series 1 (Bling) creditor committee has now been formed. An initial meeting will be in the next few days to discuss next steps and legal representation. CNF will provide an update to token holders at that time. If you are a Bling DROP token holder and would like to join the creditor committee, please let us know. Fabien is not part of this committee.
Separately we wanted to share that CNF has initiated a lawsuit against Davoa. While this has no impact on 1754 Factory LLC we wanted to share this for transparency. Separate and apart from 1754 Factory LLC, Davoa Capital LP has unpaid debt to CNF in the amount of $895,049. CNF has now initiated a lawsuit in Delaware Superior Court for breach of the terms of this debt. As 1754 Factory LLC is a special purpose vehicle this litigation will not affect its assets.
Any creditor that hasn’t contacted me directly, please contact me through dm if you want to join our group.
Regarding Branch Series 3 (1754 Factory), what is the total value of Senior DROP redemptions waiting to be served, IE, for which redemptions have been executed?