Cosmos Nonprofit Facing Vote of No Confidence Over Suspicion Its Leadership Has Mismanaged Funds

The Interchain Foundation, or ICF, which is based in Zug, a Swiss hub for crypto ventures, has come under fire.

A Swiss nonprofit backing the Cosmos blockchain is facing a vote of no confidence over suspicion its leadership has mismanaged funds.

Like most blockchains, Cosmos has been supported from launch by a nonprofit: the Interchain Foundation, or ICF, which is based in Zug, a Swiss hub for crypto ventures.

And like the foundations that back other blockchains, the ICF has come under fire.

In addition to a vote of no confidence, Grace Yu, the proposal’s author, is demanding the foundation release years of financial records.

“The ICF has observably failed to uphold its fiduciary duties to ATOM investors and the Cosmos Hub,” states Yu’s proposal, referring to the blockchain at the heart of the Cosmos ecosystem and its native token.

ATOM has fallen more than 60% since Jan. 1, hitting a four-year low.

Divided validators

As of Thursday morning, Yu’s proposal had split Cosmos Hub validators. Just under 36% had voted in favor, while a combined 32% had voted in opposition or to “veto,” signaling they believed the proposal was spam.

Another 32% voted “abstain,” meaning their votes count toward a quorum without taking either side of the debate. The vote ends Friday just after midnight New York time.

Cosmos is designed to be the “internet of blockchains,” a network of interconnected blockchains with the Cosmos Hub at its center.

The distributed network of computers that verify and order transactions on Cosmos Hub, known as validators, collectively manage the blockchain, with their owners proposing and voting on changes.

In an interview with DL News, Yu, a strategy consultant and longtime ICF critic, noted some reliable voters were sitting on the sidelines. Nevertheless, her supporters think they’ve already had an impact.

‘We had a leadership crisis and things needed to change.’

On Aug. 15, a week after Yu published a draft of her proposal, the ICF released its 2023 annual report, detailing finances from the previous year as well as future initiatives.

ICF leadership had promised to publish the report in early 2024, and attributed its delay to leadership changes.

“We had a leadership crisis and things needed to be changed; I’m working on changing them,” ICF President Josh Cincinnati wrote on X amid a back-and-forth with foundation critics, including Yu.

“There needs to be more transparency, but this ham-fisted attempt at forcing disclosure isn’t going to help, it’s going to distract,” Cincinnati said.

Cincinnati also said the foundation submits to annual audits and is in good standing with Swiss regulators, though he declined to publish the financial statements shared with those regulators, citing the practice of other crypto foundations based in Switzerland.

Cincinnati declined to comment when contacted by DL News.

‘Full transparency’

The ICF isn’t the only foundation to come under fire in recent weeks.

Earlier this month, the Ethereum Foundation was criticized for its own failure to publish timely financial reports. Members rushed to assure critics an update was in the works.

In May, it said it was working on a formal conflict-of-interest policy after an uproar prompted by a pair of prominent researchers’ lucrative ties to EigenLayer, a buzzy new protocol.

The ICF raised $17 million in 2017 when it launched Cosmos’ ATOM token. It was established to fund the ongoing development of technology behind Cosmos, and to distribute grants among developers building applications there.

‘I have no score to settle with the ICF.’

Last year, Notional, a validator run by Jacob Gadikian — another frequent critic of ICF leadership — put a vote before peers on Cosmos Hub, asking that they “formally request full financial transparency from the Interchain Foundation.”

“The ICF … has not issued any reporting to the Cosmos community on its activities in nearly two years,” it read. “Numerous current and former, ICF funded teams have come to Notional to voice distress.”

The vote passed. But to supporters’ frustration, ICF paid it no heed.

Leadership turmoil

In the months since, it has faced near-constant turnover in its leadership. President Ethan Buchman, a co-founder of Cosmos and CEO of software development firm Informal Systems, ceded the role to then-Vice President Brian Crain. (Buchman became, and remains, the foundation’s vice president.)

Crain didn’t last a year. In May, Buchman and two other members of the foundation’s five-member council voted against renewing his presidency.

「[評議会]のさまざまな部分の間、および[評議会]の一部とICF指導部との間に深い対立が生じた」と彼はXについて書いた。

バックマン氏はクレイン氏の脱退に関する自身のスレッドで、財団内部の緊張を認めた。

「正直に言うと、ICFは依然として大きな課題に直面している」と彼は書いた。 「そしておそらく、

も必要になるでしょう」

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