BPIP#7: Notification and Stakeholder Awareness Regarding Last Actions
Proposer: BlackPool DAO
Supporting Entity: Blackpool Association
Date: 13/12/2024
- Preamble
The BPIP#5 proposal, which was recently presented to the DAO, outlined a transparent and structured process for the liquidation of specific NFT assets, of which the Sorare account would contribute a significant portion, allowing veBPT holders to begin claiming proceeds from these positions. This proposal (BPIP#5) aimed to ensure fair value distribution among stakeholders while maintaining governance integrity and maximizing asset returns.
However, Mark Sherman’s (Mark) unilateral and unauthorized actions have undermined this intention. By selling key Sorare assets at a significant undervaluation and withholding the proceeds under self-imposed conditions, he has directly disrupted the DAO’s planned strategy. These actions have not only eroded the value intended for veBPT holders but have also jeopardized the DAO’s collective efforts to ensure equitable asset management and stakeholder benefit.
Furthermore, given the lack of transparency surrounding the transaction and the unusual terms of the sale, questions remain regarding whether the assets were sold to an unrelated third party or potentially to an account under Mark’s control. Such scenarios warrant further investigation to ensure stakeholder value is protected and governance principles are upheld.
In light of that, the current proposal (BPIP#7) addresses the unresolved implications of Mark’s actions.
Mark’s unilateral actions—including the unauthorized sale of Sorare cards, withholding of proceeds, and imposition of unjustified conditions—have raised significant concerns. Crucially, this proposal seeks to clarify that the funds generated from these liquidated assets should be claimable by BPT holders. By enabling stakeholders to claim their rightful portion of the proceeds, we aim to uphold the principles of fairness, transparency, and accountability within the DAO. This proposal outlines the financial, legal, and governance ramifications of Mark’s actions and underscores the urgency of addressing these issues to protect the DAO’s integrity and interests.
- Background
Mark unilaterally sold Sorare cards via an OTC transaction for $88,888 USDT, a price significantly below market value. He has retained the proceeds in a wallet under his control, imposing the following conditions:
- A signed acknowledgement from an individual terminating his agreement by 9:00 CET on November 20th, 2024 (which didn’t happen).
- Retention of a portion of the proceeds until a self-imposed six-month deadline is met, at which point Mark will consider the retained funds as final compensation.
Additionally, Mark’s actions contradicted a recent version of a governance vote rejecting asset liquidation (BPIP#5).
- Observations and Implications
Mark’s actions demonstrate governance, financial, and compliance risks that stakeholders must carefully consider. These include:
- Governance Breaches:
- Selling DAO assets without governance approval undermines the DAO’s decision-making processes and collective trust.
- Imposing personal conditions for asset proceeds further disrupts governance integrity.
- Financial Loss:
- Selling Sorare cards below market value caused direct harm to the DAO’s treasury.
- Compliance Considerations:
- Mark’s unilateral actions raise questions about adherence to governance principles and best practices in decentralized organizations.
- Implications for Stakeholders:
Stakeholders must recognize that their collective governance actions—or inactions—have material consequences for the DAO. Taking decisive action ensures adherence to governance principles, protects the DAO’s assets, and mitigates potential financial and reputational risks. Stakeholders are encouraged to act collaboratively to uphold the integrity of the DAO.
4. Financial Overview of Mark’s Actions (Amended)
Assessment of Financial Impact on the DAO Treasury
Mark’s actions have introduced substantial financial uncertainties into the DAO’s operations. A detailed analysis of the financial implications, accounting for the updated valuation of Mark’s Sorare cards, underscores the gravity of the situation:
- Asset Valuation and Losses from Sale
- The Sorare assets under Mark’s management on behalf of the DAO are estimated to hold a market value exceeding approximately $500,000, reflecting its premium nature and rarity within the asset class.
- The actual sale of cards for $88,888 USDT represents a significant undervaluation, leading to a direct shortfall of $411,112 or more (an approximate 82% discount from actual market value).
- This sale not only represents an immediate financial loss but also risks devaluing remaining assets held within the DAO by setting a low benchmark for asset liquidation.
- Fire Sale vs. Portfolio Valuation
- Historical data shows that fire-sale scenarios often lead to significant discounts. If applying the same estimated fire-sale reduction of approximately 33%:
- The Sorare Portfolio: A fire-sale valuation could place it at around $335,000, compared to its full market valuation of $500,000+.
- Even under a fire-sale scenario, the proceeds from Mark’s transaction fall substantially short of expected returns, further underscoring the financial inefficiency of the sale.
- Treasury Composition Impact
- Sorare assets historically constitute 75%–90% of the DAO’s total treasury value, with the portfolio managed by Mark representing a significant portion—over 50% at peak valuation.
- The unauthorized sale of these assets has disrupted the treasury’s balance, diminishing its overall valuation and liquidity.
- Retained Proceeds and Unauthorized Withholding
- Mark has withheld the $88,888 USDT proceeds in a wallet under his control, imposing personal conditions for its release.
- This withholding represents an additional financial constraint, effectively reducing the DAO’s usable liquidity by this amount until the six-month period elapses—or longer if conditions remain unmet.
- The lack of clear accountability or governance approval for this retention raises significant concerns about treasury management and operational integrity.
- Market Signal and Reputation Impact
- The sale of premium Sorare assets at such a steep discount risk signalling distress or mismanagement to the market, potentially devaluing other DAO-held assets.
- This perception could hinder future transactions or partnerships, as external stakeholders may question the DAO’s financial prudence and governance enforcement.
- Overall Treasury Implications
- Prior to these actions, the DAO’s treasury strategy relied on a balanced and strategic allocation of assets, with Sorare cards forming a critical component of its valuation.
- Mark’s actions have introduced a material deficit, reducing the DAO’s financial capacity and eroding its overall asset base by a substantial margin.
Summary of Financial Implications
Mark’s unilateral sale of Sorare cards for $88,888 USDT, far below their estimated market value of $500,000+, has caused substantial financial harm to the DAO. The resulting shortfall of over $411,112 represents a significant blow to the treasury, compounded by the withholding of proceeds under unauthorized conditions. These actions threaten the DAO’s financial integrity, undermine its asset strategy, and necessitate immediate action to rectify the situation and prevent further losses.
- Legal and Regulatory Overview of Mark’s Actions
Mark’s actions raise governance and compliance considerations for the DAO and its stakeholders. The following observations highlight potential areas of concern:
- Governance Alignment:
- Actions involving DAO assets are expected to align with established governance principles, ensuring transparency, accountability, and collective decision-making.
- Asset Management Standards:
- Unilateral actions and retaining proceeds from the sale of DAO assets without governance approval underscores the need for transparent, automated processes to handle asset-related decisions.
- Stakeholder and Regulatory Implications:
- Unilateral actions that deviate from approved governance processes can expose individuals involved to potential liability, primarily if these actions result in material harm to other stakeholders.
- The same actions may be viewed unfavourably in the regulatory and compliance context, particularly if perceived as bypassing collective decision-making or mismanaging DAO resources.
- Future Precedents:
- Addressing these actions decisively sets a standard for how the DAO handles similar issues in the future, ensuring trust among stakeholders and compliance with operational principles.
- Proposal
The Blackpool Association proposes the following steps for the DAO:
- Formal Stakeholder Notification:
- Formally notifying stakeholders of the governance review outcome and the unresolved implications of Mark’s actions.
- Provide clear information on the financial, legal, and governance risks involved.
- Observation Report:
- Share this proposal and the observations on governance violations with the DAO forum for transparency.
- Reaffirmation of Governance Principles:
- Reiterate that decisions involving DAO assets must comply with governance-approved processes.
- Freezing of Mark’s BPT Vesting Contract:
- As a temporary measure and until the above activities can be fully resolved, the Vesting schedule of Mark’s BPT shall be frozen, essentially locking these tokens to prevent further sales which are likely to damage the price of BPT and/or enabling Mark to claim from the liquidated treasury position.
- Invitation to Cooperation:
- Invite Mark to resolve this matter collaboratively with DAO governance or the Blackpool Association, as mandated under BPIP#3.
Note: The Role of the Blackpool Association
The Blackpool Association operates as a supportive and advisory entity within the scope of its governance-defined mandate. Its responsibilities and activities commenced upon the establishment of this mandate, and it has no oversight or involvement nor a mandate in actions or decisions taken by stakeholders prior to this period. Responsibility for past events lies solely with the parties directly involved at the time.
This proposal has been published by the association following the rejection of BPIP#6 and in response to the lack of action from stakeholders, as the issue remains unresolved and poses significant governance, financial, and compliance risks to the DAO. While the association does not hold liability for the DAO’s decisions, let alone for the actions of individual stakeholders, it considers this proposal an essential step in exhausting its current path of support within the boundaries of its role.
The association’s role is forward-looking, focusing on facilitating compliance, transparency, and alignment with governance principles. While it supports the DAO in achieving its objectives, the association is not a decision-making body and bears no liability for historical or individual actions.
- Conclusion
The Blackpool Association strongly recommends that the DAO take decisive action to address Mark’s actions and reaffirm its commitment to governance principles. Allowing such actions to proceed without challenge risks setting a damaging precedent, undermining stakeholder trust, and exposing the DAO to potential financial, legal, and reputational harm.
Proposal Decision:
☐ I agree with the proposal.
☐ I disagree with the proposal.
Proposal Specifications
- Admin(s): veBPT and sdBPT holders
- Community feedback: 3 days min
- Voting Duration: 7 days