Why the AVAX Crypto Leaks Matter to the Avalanche Community
Controversy has arisen after a new report was published by Crypto Leaks, accusing the company behind the Avalanche blockchain of participating in shady activity to the detriment of the broader crypto industry. Here’s why the leak matters and what it could mean for the future of the Avalanche, and its native AVAX token, which is currently ranked as the 17th largest cryptocurrency, sporting a market capitalization of nearly $5 billion USD at the time of writing.
What is Crypto Leaks?
Crypto Leaks is a website with the aim of publishing leaked information about cryptocurrency projects. The platform’s mission is to “expose big money corruption and hidden attacks in crypto.” The platform has recently entered the mainstream media after accusing Ava Labs, the company behind building the Avalanche blockchain, of shady practices.
Crypto Leaks claims that Ava Labs had hired paid lawyers to target and hurt competitors through direct lawsuits that also helped keep regulators at bay. The allegations have created a lot of uncertainty and talk about Avalanche, although they have yet to be proven.
What are the AVAX accusations?
Crypto Leaks has accused Ava Labs of 3 different things that are described as actions that have negatively affected the broader crypto industry. First, Ava Labs is accused of using the American legal system to attack and harm crypto projects that may compete with Ava Labs or Avalanche. The lawsuits were supposedly used to remove competition for Ava Labs and slow down competitors’ progress.
Additionally, Ava Labs is accused of suing entities in the crypto industry with the end goal of creating “regulator magnets.” Crypto Leaks describes these regulator magnets as a way to distract the SEC from Ava Labs and the Avalanche blockchain onto other crypto projects. Finally, Ava Labs is accused of targeting individuals that Emin Gün Sirer (the founder of Ava Labs) holds personal grudges against.
To back up the accusations, the report by Crypto Leaks points to a deal that Ava Labs had made with Roche Freedman, a law firm that specializes in cryptocurrency law. Crypto Leaks alleges that the deal was aimed at having Roche Freedman collect confidential information from rival companies, and subsequently trap them in class-action lawsuits. The report says that Freedman received a large amount of AVAX tokens and Ava Labs stock for this service.
Who is Roche Freedman and Ava labs?
Roche Freedman is a law firm that specializes in cryptocurrency law. The firm was founded in 2018 by partners Brian Roche and Marc Freedman. Since its inception, Roche Freedman has represented clients in a variety of legal matters related to cryptocurrency, including regulatory compliance, ICOs, and litigation. The firm has also been active in policy initiatives aimed at promoting the responsible use of blockchain technology. In 2019, Roche Freedman was ranked as one of the top 10 crypto law firms by Chambers and Partners. The firm is headquartered in New York City.
Ava Labs is a blockchain technology company specializing in developing consensus protocols. The company was founded in 2018 by a team of computer science researchers from Cornell University. The Ava Labs team has been working on the Avalanche consensus protocol for several years and released the protocol’s first version in 2019. In addition to the Avalanche protocol, Ava Labs is also working on other blockchain technologies, such as smart contracts and decentralized applications.
What did the AVAX team say?
In response to the allegations, Emin Gün Sirer, Ava Labs founder and CEO, dismissed the piece in a series of tweets.
He went on to call the Crypto Leaks report “conspiracy theory nonsense,” denying the allegations of directing Roche Freedman to select particular cases, and saying that Roche Freedman had only represented Ava Labs in a defensive capacity through a few corporate contract disputes. Beyond the tweet, Emin Gün Sirer went on to write a blog post, highlighting some of his thoughts on a higher level.
The general response from the AVAX team pointed to the lack of evidence within the Crypto Leaks report. They also pointed out areas where the report was just wrong, aimed at deteriorating its credibility. This places Ava Labs, and subsequently Avalanche, in a solid position to show the public that Crypto Leaks is a source that is not to be trusted.
What is the response from the AVAX team and community?
The community response from the AVAX community was generally in line with what the AVAX team has been saying, denying the Crypto Leaks article and calling the allegations lies. Below are a variety of messages posted on the AVAX Reddit page, where Avalanche enthusiasts have an opportunity to speak their thoughts. Some users took the unjustified dip in price as an opportunity to buy the dip:
Other users showed areas where the Crypto Leaks article was flat-out wrong, calling it a FUD attack; FUD is an acronym for fear, uncertainty, and doubt and generally refers to events that generate short-term noise without proper justification.
Certain users were a little more skeptical than others of the response from Ava Labs. However, despite that, the general consensus remains in favour of Avalanche and Ava Labs, who, from the perspective of this user “hanwookie,” have no real incentive to participate in the activity they were accused of:
How has the leak affected the Avalanche ecosystem?
In the three days following the report, which occurred on August 26th, AVAX dropped 22% from $23 to $17.90, according to CoinDesk data. As of this writing, AVAX has continued to fall, now trading at $15.50 and representing a roughly 32% decline in price.
Beyond the immediate price reaction to the Crypto Leaks report, it is difficult to measure the report’s long-term impact on AVAX, given volatile market conditions. Still, seeing the token’s price action will be interesting to watch as new information comes out about the Crypto Leaks report.
The long-term impact of the report remains to be seen, as many of the allegations remain to be proven. So far, Ava Labs and its CEO Emin Gün Sirer have handled the case well, providing well-reasoned answers. One thing that remains certain is the Avalanche community’s strength, which has rallied to defend Avalanche and find flaws within the Crypto Leaks report. Moving forward, it will be essential to keep an eye on Crypto Leaks and whether they will continue to develop their stance and put forward further proof that backs up its claims. Whether they do so will impact the longevity of this case and whether the claims made are of real sustenance.
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