Did Steemit Inc have to act by law?

in #steemlast year

Imagine if Facebook users threatened to takeover Facebook management and overthrow Mark Zuckerberg, what would Facebook do? Firstly, there is no way that can actually happen so, they don't really need to do anything other than run a PR (or brainwashing) campaign to nullify the uprising. But, what if for some reason those users had the very real option to zero all of Facebook's and Mark Zuckerberg's holdings?

(This is not my area at all) They are a company with shareholders and boardmembers and by law, they have some kind of fiduciary duty and responsibility to protect the assets of the company from credible threats. Facebook is a publicly listed corporation, it is Facebook, Inc after all.

Sound familiar?

Of course, the users of Facebook do not have that power as to do so, they would need to have direct and influential access to the bank accounts of Facebook and Mark Zuckerberg, and they don't come with a free sign-up.

Now, Steemit Inc is a private company that likes to keep its asset structure quiet and, perhaps for good reasons. Potentially, when Steemit Inc got itself incorporated the incorporation included the ninja-mined stake that is all so contentious a subject at the moment. However, that means that the ninja-mine while controlled by employees of Steemit Inc, is actually the belonging of Steemit Inc itself.

Unlike pretty much every other company on earth, the stakeholders have access to not only see the holdings, but could potentially actively destroy it if they get enough support. While @ned might be able to take the risk, it is likely the lawyers who handle his business activities are much less willing to do so as they become liable through their own legal duties to legally protect the assets of the corporate entity.

As said, I am definitely not a corporate lawyer let alone one in New York where Steemit Inc is registered, but as soon as a company becomes a company there are various legal obligations that must be considered in various instances and it is very possible that a threat however vague or unlikely, triggered a near automatic response by law. Crypto people tend to forget about laws, Incorporated companies however cannot otherwise, people go to prison for failure of duty or criminal activity.

As far as Steemit Inc and the law are concerned, a pledge saying "we aren't going to rob or burn your accounts", from the same people who were discussing doing just that, is unlikely enough of a reassurance to satisfy the duties of incorporation enforced by law. It is possible that the only move Steemit Inc had after the Pull Request was filed was to protect its stake the best they can at the behest of a legal team or board, likely both. @ned may have zero choice in this matter at all as he is CEO, not owner.

Again, I don't know the structure of the company nor do I have any idea if or how the stake they hold is included into the company as an asset but, if it is an asset, I am pretty sure that they would be legally forced to protect it from harm. This might actually be a pretty unique situation in the world of corporations for as we know, generally they don't have bank accounts that are open with a group of people not employed by the company with the power to burn it all.

I would say that if it is on an exchange and the exchange failed or stole it, it would be covered by insurance, but if it is left in known wallets and could just be taken by a majority vote, insurance might not see that as adequate protection. While Steem wallets are safe for the average user, Steemit Inc wallets are a very big target beckoning to be breached. Again, I don't know much about these things but fiduciary duty could also explain the HF9 actions if Steemit Inc would have been liable for damages. While people might not like the situation, law still often trumps ideals.

[ a Steem original ]

Warning: This is all conjecture and largely based on assumptions. If there is a corporate lawyer in the house, that'd be great.


Seems like even though the ninja-mined stake wasn't an ethical decision, Steemit Inc are not obliged to burn it. It was theirs all along from the beginning and nobody has the right to take it away. And people who disagree with this decision may freely leave and create their own platform as some have done.

On the other hand ninja-mined stake might have been even necessary to cover the costs of developing he blockchain and the platform. Of course all that money might have been managed much better so as not to be have been affected by the bear market. What do you think?

I think it is too early to burn also as while many see the stake as a risk, perhaps it is also a potential protection in the early stages of the chain too. It definitely could have been better managed and if it was, likely these questions wouldn't be approached so aggressively.

On phone, short comments :)

Yeah, I blogged about this today as well.

I think you have already pointed out that the system we have now is better than the alternative.

If we nullify ned's stake then the next people in line are the witnesses, creating a system of zero checks and balances.

When it really comes down to it, we are not ready to fork until we come up with an alternative consensus algorithm; one that can better identify trustworthy individuals rather than trusting based on how many coins are in their wallet.

Impatience runs rampant on this platform. #wait

impatience in crypto in general I think. Will have a read in the morning. In bed now.

Not directly connected to this post but is, kinda, sorta....

If the daily reward pool is manipulated by big stakeholders to maximize their returns, and in doing so, reducing the rewards to others by their own actions..(going back in the pool for redistribution)
...does this then take it into the realms of market rigging and unjust acquisition...?
It's something that might need to be addressed at some point, in the legal sense...

It isn't rigged, it is coded in. It is part of the Blockchain so investors would know that coming in, just like all the people have been happily making money while steemit Inc held for 3 years.

It was just something that popped into my head when I was reading something about the fraud and graft pre US depression...

'coded in' doesn't make it legal..

At this point I don't think there is a concern considering there is no manipulation, stake has draw on the pool, 1:1

How so...?

The system of steem, (in theory)
scaled map - Copy.jpg

With flagging and downvoting....

If a system can be gamed, it will be by some bad actors..

Where am I wrong in my diagrams?

considering there is no manipulation

This why big player down voting with bots is done without concern - as long as it goes back into the pot, the rewards will favor the bigger player??

Anything that returns other people up votes back into the pot, is a win for big players..

THAT is manipulation..

Your diagram is wrong. No whale can flag everyone and what is flagged is miniscule in comparison to what is not, they have 10x flags a day. The pool is still accessible by everyone. Most value of the pool goes to small users - I think @taskmaster4450 might have numbers on this. What goes into the pool is distributed by stake. There is 870k Steem in the pool today. The largest whales have votes of something like 50 Steem a vote. Most whales do not flag very much at all.

Your diagram is a misrepresentation by omission of complexity and numbers.

Edit: also, if the large actor is flagging, to draw from the pool they will also need to get voted significantly to get any gains, however slight those gains may be. After they flag everyone indiscriminately, who is voting for them? How are they going to draw from the pool more than what they would get from upcoming themselves or selling their vote. Flagging to gain from a larger pool is the most ridiculous way of trying to maximize earnings.

After they flag everyone indiscriminately, who is voting for them?

...they do it all the time!

As for manipulation - bid bots are in there too - if all they are doing is taking up votes and redistributing, surely (and making profit).

Irrelevant of the numbers involved, it's a dynamic that would be surely counted as illegal (manipulations of financial markets if it was seen as money), or something dodgy - I could guarantee a lawyer could come up with something...

I wonder if that 'loophole' has had any influence on the lack of growth..(I dunno, just putting it out there...)

Most value of the pool goes to small users - I think @taskmaster4450 might have numbers on this. What goes into the pool is distributed by stake.

We know big people have hundreds of small accounts (thousands)...so...

We know big people have hundreds of small accounts (thousands)...so...

You are still missing the point. someone has to upvote them.

Steem inc would have to be a privately held corp for the funds to be legally transferred the way the have..
Interesting legal arguments due to corp laws.

It is a privately held corporation.

"Steemit, Inc is a privately held company based in New York City and a head quarter in Virginia founded by Ned Scott and Dan Larimer in 2016. In July, 4th, 2016, the company officially launched Steemit, a social media with virtual currency rewards that runs over the Steem blockchain."

I will talk to son when he gets here later but he will tell me that being private corp, its just like a partnership with some tax advantages. Between the two of them they can hold all the corp officials.

Dan is out supposedly but the mine is still there. Why didn't he take half?

If there is any legal action comming it willl be from Dan who is entitled to what is in the corp bylaws at startup.
I hope that they are working teoghter and not doing the lone wolf thing. LOL someone will have to be first in a crypto lawsuit over entitlement of assets.
One person cannot hold a privet corporation. One person can only hold 2 of the 3 required officers. There is to much that we don’t know yet

Interesting take on it. As private hodlers its easy to forget that businesses have all sorts of complexities to address. Excellent point.

I don't know if it is accurate but it is definitely something that should be considered, especially if the expectation is to bring corporate investors in. How many companies will risk their account if witnesses will fork them if they don't like the business model? That might not be the case now but Google used to do no evil once upon a time also.

Exactly! The immutability of the blockchain with the only exception being some kind of serious security breach is part of the core value proposition of Steem. If that is sacrificed, then it's all over.

Even if it's not the law it's just smart. People are playing games with the entire livelihood of an unknown number of people. No amount of public declarations or pinky swearing is going to be sufficient when you were casually chatting about my utter destruction. What planet are people living on?

"Pinky swearing" :D

Yeah, I can't say I wouldn't have done similar to be cautious. What might be interesting though is that if the witnesses did fork it out of existence or take control of it, the Steem is also protected by law making it a criminal act I think.

I think this is probably a situation where the technology has outpaced the legislation but it would make for an interesting case. It could potentially be used as a case that sets precedent on activity in the cryptocurrency universe. These sort of cases happening is usually what end up shaping future legislation.

If the Steem is registered as an asset in the company, then it is the property of the company. There are already laws for that. You are right though, there is a lot of legilation structure to be built still.

Yes and being consider chattel (property) the quarterly taxes would be due in March if converted to anything from steem due to the new IRS Regs put into place.
The question is ,is converting from SP to steem a tax liability.

They haven't said they are selling, just moving to an exchange. I think it so is still Steem so it shouldn't matter... Dunno though

So much we don’t know
Dan resignation of steemit inc only has more question as to his assets. We don’t even know who the officers of steemit inc are.
So were just a bunch of redfish in a pond in the middle of the country thinking we can play in the ocean.
People talking about taking away someone’s steem. Better look at the legal aspect of those actions.

One thing they might do is move the funds to exchanges, exchange them for privacy coins bit by bit, buy back on other exchanges and transfer them to anonymous accounts.

I suppose taking legal steps like that would help in the production process. I wonder if it affects a decentralisation and blockchain. Thanks for sharing. @tarazkp

Basically everything anyone suggested Ned do in the last week would have opened him up to a shareholder lawsuit. That's part of why it was so appalling.

Theoretically it would have been possible to call an emergency board meeting to make some of those decisions, however.

Since we don't know holding details or even who's on the board, it's hard to reason beyond that.

Yep, this is conjecture alone as i don't know the structure of the company. Maybe Dan is still on the board. He didn't take half the stake at least.

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This is precisely what I thought when it all transpired as they are surely seeking to safeguard the assets some way. While we do not know the governance details, it would be a necessary move to avoid issues with shareholders. On the other side, I would also think they could be setting up a sale or partnership as well but again it all comes down to their poor communication as of late!

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I would also think they could be setting up a sale or partnership as well but again it all comes down to their poor communication as of late!

I consider this likely too. But communication might risk the deal considering how volatile markets can be perhaps.

Yes, the legal part must be very well managed, but the emotional and publicized part is the one that arrives the most, and creates uncertainties.

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