Paraspace NFT protocol ‘usurper’ resigns after failing to overthrow CEO

Update (5/19/2023 14:25 UTC): This article has been corrected to reflect that Thomas Schmidt and Jay Yao are (or were) consultants of ParaSpace NFT. A previous publication of this article erroneously named the two individuals as co-founders. Cointelegraph regrets this error. 

The ParaSpace nonfungible token (NFT) protocol saga over the whereabouts of the protocol’s fund took another turn on May 19 as the project’s consultant Jay Yao resigned from his position in the company. Last Week, the NFT protocol made headlines over the missing funds and a barrage of accusations by executives and the CEO against each other. In a statement to Cointelegraph, a spokesperson for ParaSpace wrote:

“Yubo has never done any embezzlement. The whole issue is a setup. Jay and Thomas are neither shareholders nor co-founders of ParaSpace. Their action has no relation with ParaSpace.“

The spokesperson also claimed that “Jay and Thomas are illegally using multisig and Twitter accounts to threaten Yubo as they collude to take over ParaSpace.“ The same day, blockchain analytics firm Secure3 published a report stating “all funds are repaid” and “we didn’t see any evidence of fund embezzlement.“

We noticed a debate on @ParaSpace_NFT user fund. We tracked down the transactions related to the address. Our findings: 1. All funds are repaid2. There’s a clear repayment schedule. The process started from 2023/03 to 2023/053. We didn’t see any evidence of fund embezzlement pic.twitter.com/Jz7lL3qOA8

— Secure3 (@secure3io) May 19, 2023

The decision by Yao to leave the firm came a week after the ParaSpace team clashed with the CEO Yubo Ruan, about the missing funds. At the time, Ruan maintained that he was innocent and being framed by the likes of Yao to step down as CEO. Ruan also alleged that Yao and another ParaSpace consultant Thomas Schmidt illegally obtained access to the protocol’s multisig accounts and social media platforms.

Contributors at @ParaSpace_NFT ,

I write to make you aware of a pressing matter concerning our company. Two former consultants, Thomas Schmidt, and Jay Yao, have illegally obtained control of one of the protocol’s multisig and social media accounts. They did so by contacting key…

— Yubo Ruan (@yuboruan) May 10, 2023

Yao took to Twitter to announce his departure from the firm a week later and apologized to the community for letting internal matters affect users. He added that the whole saga was never “intended to be a public matter, and it should have been resolved internally.”

Earlier today, I, along with other team members, resigned from my position at ParaSpace.

I am incredibly thankful and fortunate to have been able to work with so many talented individuals. Without them, ParaSpace wouldn’t have achieved the success we had.

While we are still…

— Jay (@MrFryR) May 19, 2023

The ParaSpace saga revolves around the mismanagement of 2,909 Ether (ETH), estimated to be worth $5.4 million, which started with a price slippage attack on the NFT protocol on March 18. Crypto security firm BlockSec immediately intercepted the attack. To prevent hostile actors from gaining access to the money, the security firm removed 2,909 ETH from the protocol and returned the assets to ParaSpace.

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The ParaSpace team claimed that out of 2,909 ETH, only 50% was added back to the protocol’s treasury. The team accused Ruan of mismanagement of funds, as he had exclusive access to the mutisig wallet. The team comprising Schimidit and Yao demanded Ruan be forcefully removed from his position as CEO. However, in the end, Yao resigned from his position along with his team.

Magazine: Should crypto projects ever negotiate with hackers? Probably

Update (5/19/2023 14:45 UTC): This article has been updated to reflect a statement from ParaSpace, along with a novel tweet from Secure3. 

Cointelegraph editor and journalist Zhiyuan Sun contributed to this story.