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In early 2020, Dominic Williams was feted at the World Economic Forum in Davos, Switzerland, as the next king of blockchain technology. Williams is the founder of the Dfinity Foundation, a Swiss nonprofit organization that started an ambitious project called the Internet Computer, backed by Andreessen Horowitz, one of the most prestigious venture capital firms in Silicon Valley.

The project, years in the works, generated a lot of buzz last month before its initial coin offering, the crypto equivalent of a company going public and listing shares for investors to buy. In early trading after the market debut, the total market value of the Internet Computer token, or ICP, was worth tens of billions of dollars, making it one of the 10 most valuable cryptocurrencies at the time.

The ICP token is designed to help operate a decentralized layer of web infrastructure being built by Dfinity that believers say will liberate users from reliance on companies such as Amazon and Google. The technically complex network would make it easier for people to build software and publish directly to the internet without going through the tech giants’ platforms.

But by last week, ICP’s value had tanked by about 95%.

Even in the famously volatile crypto market, ICP stands out. The stunning climb and crash of this prominent project has market watchers puzzling about what happened — and who may have profited.

Miguel Morel, founder of Arkham Intelligence, a crypto analysis firm that followed the movements of ICP tokens on the blockchain, said the price action and flaws in the coin-offering process suggested “something went wrong.” In an analysis that Arkham first shared with the DealBook newsletter, the firm noted that “a token dropping over 90% in the first month after launch is highly unusual for a project of this scale.”

The process for claiming ICP tokens stands out, because “Dfinity did not follow the playbook of other successful projects,” Arkham said. “Instead, it appears they quietly allowed the treasury and insiders to send billions of dollars of ICP to exchanges, while making it extremely difficult for their longtime supporters to access the tokens they were promised.”

Arkham identified 44 “probable insider addresses” that deposited 10 million ICP tokens worth more than $2 billion to exchanges after the initial coin offering, giving the impression they were transferred for trading, not safeguarding. These transfers coincided with significant drops in the price of ICP, the report said. Small investors, left out of the process, were stuck.

Dfinity gave late, complicated instructions for small investors who bought ICP tokens when they were very cheap in a 2017 crowdfunding round, Arkham said. The process was buggy, and investors complained about limited customer support, according to the report. Morel, who co-founded Reserve, a cryptocurrency created for hyperinflationary economies, said that based on his experience with initial coin offerings, the Dfinity approach was unnecessarily complicated.

Dfinity said in a statement that bad actors on social media were undermining its project: “Day traders with alternative agendas and unethical crypto projects have used Reddit and Twitter to confuse the public.” Dfinity said the initial supply of ICP was moved to a custody account at Coinbase, a big crypto exchange, for transfer to various categories of investors, many of whom “immediately transferred tokens” to avoid fees or “safeguard their ICP.” Dfinity said it was important “not to confuse transferring tokens from Coinbase Custody to other exchange wallets for safekeeping as ‘selling’ tokens.”

Dfinity also denied that the token claim process for early investors was overly technical; the holders who had difficulties trading got the support they needed, the company said. Michael Lee, a Dfinity spokesman, said the company was taking the “high road” and focusing on developing its Internet Computer project, noting that backers such as Andreessen Horowitz remain committed. (A spokeswoman for the venture capital firm declined to comment.)

Some industry observers say the ICP crash was simply bad luck for a hyped project that happened to be listed just as extreme enthusiasm for crypto was waning.

But Morel said that during the recent downturn, ICP fell more than any of the top 100 cryptocurrencies by market cap, worse even than the decline in Shiba Inu Coin, a joke token based on the meme cryptocurrency Dogecoin, which itself was intended to mock crypto and internet culture. In other words, a postmodern comedy project with no technological proposition backing it experienced less distress than the token underlying Dfinity’s grand goals — and that’s a serious matter.

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