Crypto: Erable, a project with a negative impact
Two years after raising several million euros from 4,150 investors, Cardashift, now known as Erable, is far from having delivered on all its promises. The Big Whale reveals the behind-the-scenes details of a project that may have benefited some of its co-founders. Several investors are preparing to lodge a complaint.
The day of glory. This 16 June 2022, Vincent Katchavenda is on stage at Vivatech, the European tech mecca organised every year in Paris, to present Cardashift, a crypto project he co-founded with several associates.
For the past few months, Cardashift has been one of the darlings of the French crypto ecosystem. In January, the project completed a very successful cryptocurrency fundraising (ICO) via the Cardano blockchain.
In total, the start-up "officially" raised nearly €10 million from 4,150 investors, who each received "Claps", Cardashift's cryptocurrency, in exchange for their investment.
With this money, Vincent Katchavenda and his partners announced that they were going to create a blockchain platform to finance "impact" companies, i.e. companies whose mission is to marry profitability and environmental objectives. It is the Clap holders who will choose the eligible projects and who will be able to invest in them via their Claps.
And just that, on 16 June, Cardashift is due to reveal the names of the first two projects that the platform will support and push to its community: Pyxo and Révolte.
Pyxo specialises in reusable containers, while Revolte is a company whose aim is to extend the lifespan of electric vehicles.
On social networks, some members of the Cardashift community and the founding team are welcoming this announcement, which is being presented as the start of a "long series". After Pyxo and Révolte, other companies must follow!
The problem is that more than 18 months after the VivaTech show, the promises are far from having been kept.
1/ The platform that was supposed to serve as a launch pad for projects never saw the light of day.
2/ Cardashift, which has since become Erable, has only supported a total of 3 companies, Pyxo, Révolte and Homecycle - for overall funding of just over... €100,000.
3/ Cardashift's cryptocurrency, Clap, is now worth virtually nothing and is no longer available to buy or sell on any platform. The token is due to migrate from the Cardano blockchain to Polygon by mid-2024.
Most importantly, the company appears to have resorted to more than dubious practices on a number of points such as the management of ICO funds or price manipulation.
"Not everything went according to plan," Vincent Katchavenda, who is Erable's chief operating officer, admits today. "Whether it was with the technology (Cardano, editor's note) or the projects, we encountered a few difficulties", he adds, denying however any fraud or misconduct.
According to our information, several investors are preparing to lodge a complaint. "I lost more than 5,000 euros in the operation", explains one of them. Others may have lost several tens of thousands of euros.
To understand what happened, and how Cardashift was able to go from light to shade, we need to go back to the origins of the project, and to the year 2021 when the crypto markets literally exploded.
"Rigged" votes and suspected overcharging
The idea for Cardashift originated with Smartchain, which is a well-known player in the French crypto world. Launched in 2019, the company, which had up to sixty staff in 2022 (it now has just twenty or so), specialises in technical support for crypto projects.
Adrien Hubert, who is one of the founding partners of Smartchain, was the main inspiration behind Cardashift. "Our belief was that blockchain could make it easier to finance impact projects that were struggling to attract investors," rewinds the young entrepreneur.
In the spring of 2021, one of Adrien Hubert's acquaintances, Tangui Friant, introduced him to two other companies, Matters and Stim, specialising in IT and impact. In September 2021, Adrien Hubert set up Cardashift, a wholly-owned subsidiary of Smartchain, and agreed with his future partners that they would eventually take a stake in the company. The project is in the starting-blocks. All that's missing is the fuel to really get the venture off the ground.
To finance the project, the trio decided to hold an ICO. The timing was not insignificant: in autumn 2021, the crypto markets were at their peak. In November 2021, bitcoin reached its all-time high of almost $70,000.
To prepare for their ICO, Smartchain and its new partners organised a private sale to hand-picked investors. These private sales are held at advantageous rates for investors, 105 investors in total, before the sale to the general public.
Between October and January, Cardashift raised just over $1.5 million through its private sale. Some important figures in the crypto ecosystem such as David Prinçay, who is the current chairman of Binance France (the French subsidiary of the Binance platform) and a former partner at Smartchain, took part in the deal.
In January, and with a great deal of communication in crypto media (sponsored articles) and with some influencers, Cardashift raised $8.4 million in its public sale, bringing the total to $10 million, and making Cardashift one of the largest French ICOs. "It was a pretty crazy moment," recalls a former member of the team.
The three partners, who now have a pretty penny to their name, now have to deliver and create the platform. And it was here, according to numerous witnesses interviewed by The Big Whale, that things started to take a funny turn.
First on the reality of the funds raised.
Officially, the team claims on social networks and in some publications to have raised $10 million. But in the post Medium published by the company, the total sum does not even reach $8 million. And going by the company's social accounts, Cardashift, which has in the meantime become Erable, would have raised "only" €5 million, almost twice as much as officially announced.
Did the company want to over-communicate or was there a desire to hide part of the ICO from the tax authorities? When questioned, Erable acknowledged a few errors in communication, but blamed former service providers in charge of these matters.
Erable's operating system also raises legitimate questions. For more than a year, the company will have no employees, but it is the co-founding companies that will provide the company's workforce by re-invoicing Erable.
Each employee is invoiced €750 per day by Cardashift. "That's a usual rate for consultants," Adrien Hubert, who was Erable's financial director at the time, justifies today. "It's even cheaper than what you'll find on the market. But it's still more expensive than having employees...
Whatever happens, soon enough the days of invoicing are going to pile up, with no real results to show for it, and start to really weigh on the company. At one point there were more than 30 full-time staff," recalls a person close to the project. Even when you have several million dollars, it goes quickly", explains a former project employee, who points out that some of the "consultants" made available to Erable were sometimes on... work placements.
And above all, the real intentions of some of the partners began to raise questions. "Quite quickly we realised that some of them weren't necessarily there for the right reasons and that the project was totally opportunistic. There was a lot of money and it was easy to get it back", sums up a former member of the project.
Technical problems also appeared. "There was a lot of talk about blockchain, but in reality it delivered very little", explains a consultant, who points to the amateurism of the teams and a "surreal" first half of 2022.
Meanwhile, the deadlines are approaching, and investors want to start selecting projects and obviously investing. Smartchain and its partners therefore select a series of 10 projects to submit to the votes of Claps holders.
So Pyxo and Revolte are finally selected and presented at VivaTech in June 2022.
But here too, some who worked on the project at the time are beginning to wonder. "The votes were rigged", explains one of them. According to documents we were able to consult, it was in fact two other projects, Aquaverse and Carboneo, that should have won if the Erable team had not arbitrarily changed the voting system at the last minute to allow its founders to vote.
When questioned, the current Erable team denies any manipulation of the votes. "That's totally untrue," explains Adrien Hubert.
Beyond these issues, the platform ultimately never saw the light of day, and Matters decided to leave the venture in the summer of 2022. When contacted, none of Matters' managers wished to comment.
Pivot to NFTs
In September 2022, only Stim and Smartchain remained in the boat. Faced with difficulties in developing the platform, Cardashift will eventually scale back and pivot to create an NFTs marketplace.
NFTs are supposed to represent assets of the companies backed by Cardashift. "We had to change our model to do something simpler," justifies Adrien Hubert.
But here too, the method raises questions: the creation of the marketplace was in fact invoiced by Smartchain, which retained ownership and made it available to Cardashift in the form of a licence. "Why do this?", several investors in the ICO are now asking.
The sale of Revolt's NFTs takes place in December 2022. That of Pyxo in April 2023. In the meantime, Cardashift has therefore become Erable.
The price of the NFTs in the two collections, which are intended to allow investors to receive part of the revenue from the Pyxo and Revolte businesses, rose sharply in the few days following their sale, before falling back sharply.
Some investors suspect price manipulation by the Erable team to create the impression of interest in these new products. According to an analysis of on-chain data, a large proportion of the volumes on the collections were in fact fed by wallets belonging to Erable. This is known as "wash trading", a practice that consists of artificially inflating their attractiveness.
For its part, the team denies any manipulation and justifies these operations by explaining that it was necessary to create liquidity on the NFTs collections.
And yet, faced with suspicions of washtrading - i.e. price manipulation - OpenSea, which is now one of the world's leading NFT platforms, has frozen Revolte's NFT collections.
After Matters, several co-founders of Erable distanced themselves from the company, which currently has nine employees and enough cash to last 18 months, according to our information. According to our information, Erable is in the process of raising funds, this time in equity. When approached, several investment funds declined. "The co-founder of Stim, Frédéric Arnoux, is no longer fully involved in the project. The same goes for Adrien Hubert, who no longer has an operational role in Erable. According to our information, he has also just sold his shares in Smartchain.
But importantly, several co-founders or former co-founders of Erable, including Adrien Hubert, have launched several new companies, all of which have a link with... Erable. These include Keenest and Endless See, two start-ups specialising in financing impact projects via blockchain.