Last week, Kaddex, the biggest DEX on Kadena was caught on-chain double dipping their own public sale and diluting investor share while allocating a bigger share of their token to themselves. Kaddex admitted guilt and promised to burn the ill-gotten tokens. CFO Daniele de Vecchis symbolically stepped down from his CFO position. In reality nothing changed, it’s business as usual for Daniele de Vecchis and the rest of the Kaddex team. Questions remain unanswered, anyone from the community demanding to know more is silenced and banned. Lack of transparency surrounding these actions combined with suspicious involvement in Kaddex from one of the official Kadena team members, Francesco Melpignano, makes Kadena unattractive for DeFi investors and builders.
About the author
Table of Contents
I’d like to introduce myself to give you some context as why I am writing this piece. I was a novice investor in 2017 and held small amounts of cryptocurrencies. After the 2018 crash I became disillusioned with crypto, until in 2020 I rediscovered Coinmetro. I accidentally invested in their ICO in 2017/2018. After seeing a couple of AMA video’s from their CEO, Kevin Murcko, my faith in crypto was restored. This man refuses to list shitcoins and dogcoins on his exchange, he’s all about ethics and regulations. For some weird reason he’s one of the few people in crypto who doesn’t want to enrich himself, but instead provide value to his clients and move crypto forward in a more positive direction. If something hasn’t been listed on Coinmetro, I don’t even consider buying it, and that’s how I met and fell in love with Kadena.
What is Kadena?
Kadena is a Proof of Work (PoW) Layer 1 (L1), which truly solved the trilemma. Kadena can scale out infinitely while staying decentralised and secure. Unlimited chains can be added, adding throughput while keeping gas fees on Kadena low forever. The tech behind Kadena is great, but unfortunately this article isn’t written to shill Kadena. DeFi on Kadena is still in it’s infancy, and it’s on it’s way to make a false start.
What’s the issue?
The problems on the Kadena chain revolve around Kaddex. Kaddex is aiming to be the biggest DEX, often officially sponsored and tweeted about by the official Kadena Twitter account. Not a lot on Kadena is being built yet. Kadena delivers blueprints for various DeFi structures and it’s up to the community or companies to use those blueprints to start a project or dapp. The current deployed version of Kaddex is based upon KadenaSwap, the blueprint from Kadena for a DEX.
Recently an article published by yours truly uncovered that the team behind Kaddex used investor funds from their private sale to buy massive amounts of their token $KDX in the public sale. Through the usage of 100’s of proxy accounts, likely using fake KYC’s at Tokensoft, they allocated an additional 1.15% of the total supply to themselves. In a string of statements from the CFO, digital profile Mandrake, currently operated by Daniele de Vecchis, the CFO admits that Kaddex was the buyer and that he will resign his CFO position. His exact statements will be shown further below.
I’m tired of hearing that 1.15% of the total supply is insignificant, if you do think so, you can stop reading. However, I do invite you to donate 1.15% of your net wealth to my KDA address, k:f77cecea29d36642c908b926b0623cb4dadc1b2c8587fbd8eb04998627de7a3d on chain 4, if you truly believe 1.15% is nothing to worry about.
Before we deep dive in the inception of Kaddex, there’s one more person I want to introduce: Francesco Melpignano. Francesco Melpignano is currently the CEO of Kadena ECO, an organisation tasked with incentivising building on Kadena. Recently they announced a $100M fund: https://twitter.com/kadena_io/status/1517096122182942720
At the time when Kaddex started and was announced, Francesco Melpignano served as head of Business Development for Kadena.
Kaddex — a deep dive
We’ll discuss all the events surrounding Kaddex in chronological order, starting at the inception. Kaddex started out as an anonymous project. The first person to know about and to announce Kaddex was Francesco Melpignano. Melpignano claimed “an independent team approached us”.
Shortly after the announcement of Kaddex, a private sale followed, in June 2021. In the private sale Kaddex raised 3,242,085 KDA from anonymous investors. The private sale itself was dubious in nature because there was no KYC or any AML compliance.
Some time after the private sale concluded, an article (from another author) appeared, it was alleged that Francesco Melpignano was behind Kaddex, which would make Kadena and Kaddex run by the same people, while the community was told a separate entity would build Kaddex. The article discussed two major points: (1) the private sale may not have been legal and compliant and (2) Francesco Melpignano is involved in both Kadena and Kaddex. Whether or not the private sale was legal or not is no concern for now.
Key takeaways from the article as why Francesco Melpignano was alleged to be involved in Kaddex:
- One developer from Kaddex was doxxed: Guglielmo Sportelli, Application Developer at Redwing Labs.
- The website kaddex.com was found on a dedicated server belonging to Redwing Labs.
- Redwing Labs operates under the names of Redwing Labs, Redwing Technologies and RWL S.R.L.
- Francesco Melpignano was found to be the owner of the Redwing entities.
- When Francesco Melpignano was asked to comment on the situation, Melpignano responded by starting a cleanup; he deleted his LinkedIn (now restored without Redwing present). Guglielmo Sportelli had to remove Redwing Labs from his LinkedIn (see below) and the website kaddex.com was moved out of the Redwing Labs dedicated server to another hosting provider.
None of the issues raised in this article were ever addressed and always disregarded as “FUD”. Bringing up “Redwing Labs” and “Redwing Technologies” resulted in a ban from any Kadena and Kaddex related channel.
Coming out of anonymity
A month after the article was published, the Kaddex team decided to step out of anonymity. Picking apart their introduction statements show that several people mention that they have been with Kaddex since the start, most notably the CFO, Daniele De Vecchis and many of the other Italian-sounding names, namely, Adrian Cardoso, Giuseppe Pace, Guglielmo Sportelli and Felice Angelini.
Another important note is the introduction statement of Nicolas Ramsrud, Ramsrud states that he has been “recently brought on” as CEO and CPO. Who did Ramsrud replace so quickly before the team could be doxxed? Or perhaps that person is not replaced and Kaddex still has more undoxxed team members?
“Founding” members backgrounds
Let’s dive into the background of these “founding” members. First off, the originally doxxed team member, Guglielmo Sportelli. It was found out that Sportelli was working for Redwing Labs after the private sale. Currently Sportelli only lists Kaddex as employement. Why is it so important that nobody knows Sportelli was involved in Redwing Labs?
Second up we have another developer, Antonio Semeraro, Antonio was not yet mentioned because we don’t know if Antonio Semeraro worked for Kaddex since the inception of Kaddex or not. Antonio Semeraro announced in his introduction statement that he has experience working for Redwing Labs. Project Manager Adrian Cardoso still states on his LinkedIn that he works for Redwing Labs. I can commend Adrian for not trying to erase history, but not for not speaking out against Kaddex’ financial misconduct.
Next up is Giuseppe Pace. Giuseppe used to work for Redwing Labs as Chief Technology Officer (CTO) but has since scrubbed his LinkedIn profile and replaced his function at Redwing Labs with Self Emplyoed[sic]. Scraping site Rocket Reach scraped LinkedIn and still has an archived record of Giuseppe Pace working at Redwing Labs: https://web.archive.org/web/20220320162015/https://rocketreach.co/giuseppe-pace-email_233459694.
I was unable to link the other members, Felice Angelini and Daniele de Vecchis back to Redwing Labs. At this point we do know that at least 4 of the “founding” Kaddex members are or were Redwing Labs employees. 2 out of those 4, 3 out of 5 if we include Francesco Melpignano found it necessary to try and erase the link to the past they had with Redwing Labs. We also know that Redwing Labs is owned by Francesco Melpignano. Kaddex is likely a Redwing Labs project, which makes Francesco Melpignano the owner of Kaddex.
Francesco Melpignano is also the CEO of Kadena ECO, the grant program which has $100M to spend on Kadena incentives. It’s very dubious that Kadena would put the same person who owns the biggest DEX, Kaddex, and the biggest wallet, X-Wallet, in charge of the ECO grant programme.
Financial trouble? The double dip
We arrive at the 18th of April, when I disclosed that Kaddex used private sale investor funds to buy their own public sale. Read the full article here. Kaddex allotted themselves 1.15% of the total supply, valued at the time of the sale at $1,840,000 US dollars. To do so, Kaddex used hundreds of proxy accounts because the maximum limit was set at 100k $KDX. The Kaddex team allegedly tried to use bot votes to game the DAO (Discord) and raise the limit, but the community prevented that from happening.
Fairly quickly after the article Mandrake issued his first response. There would be an extensive reply, the “FUD” would be dealt with and Daniele de Vecchis mentions something about ethics. Note that I have written a second article about suspicious on-chain transactions from Kaddex. Daniele de Vecchis could respond to and dismiss the allegations fom the second article within an hour, those transactions were over half a year old: Daniele de Vecchis knows exactly what goes on on-chain and knows everything about the finances and financial transactions of Kaddex.
What actually followed was a very short statement, no “FUD” was addressed, it was confirmed that Kaddex used investor funds to buy their own sale. Daniele de Vecchis also claims to respond to community questions. Over the course of 12 days after the article was published, I can’t think of a single question regarding the double dip incident that has been answered by the team. Kaddex pretends to be a DAO, but Kaddex uses their Discord “DAO” for one single purpose: top down centralised communication to the commoners. It’s also curious to read that the tokens acquired in this way will be burned, if the tokens were acquired for any legitimate purpose, they would not have to be burned.
Several days later Daniele de Vecchis follows up with another comment, simply stating that he drops his CFO position. Nothing else has been said or cleared up about the incident. I think it’s safe to say that if the funds were to be used for legitimate purposes it would have been better for everyone involved if Daniele de Vecchis simply explained what the funds were needed for, instead de Vecchis took the blame and resigned his position. Up until this day it’s not clear what resigning his position means; stepping down from the CFO position or leaving Kaddex. For now, it seems to be business as usual and ignoring the community and their questions.
It’s curious that none of the other team members speak about this incident. One of the few team members making a statement is Steve D’Agostino, Chief Marketing Officer. D’Agostino thinks it’s best to burn the tokens and move forward. None of the other team members dare speak about the incident or answer questions in any way, shape or form.
Instead of answering questions, Kaddex decided to start banning the community members who kept asking for clarification and transparency. I’ve also tried personally to get in contact with Daniele De Vecchis through his Mandrake account on several social medias, every attempt has been chilled. The team is building a big wall around them to protect themselves from the community, the same community they claim to serve with their DEX and DAO.
Conclusion: what now!?
Kaddex cannot seem to move forward or backward on this issue. Instead of giving the promised full transparency, they do what they do best; try to bury the issues by banning people who ask questions and going back to business as usual. It shows how hypocritical the team is and how much contempt they have for the community. What we now know is that Kaddex double dipped the sale, they admitted to it. The bought KDX was not meant for the community or to spend later, because they are going to burn it. It would not be burned if it was bought for benevolent purposes. The incident is severe enough for one of the top dogs to resign their function, in this case Daniele de Vecchis.
Many questions arise.
- Was this fraudulent behaviour from Kaddex solely authorised and carried out by Daniele de Vecchis or is de Vecchis taking the fall for the rest of the team?
- Why do the other team members still condone Daniele de Vecchis in their team after these fraudulent actions, who else was involved?
- What is the involvement of Francesco Melpignano in Kaddex? Why do so many team members stem from Redwing Labs? Why did those team members and Francesco Melpignano himself go through the efforts of scrubbing their public profiles from Redwing Labs?
After aligning the facts, I cannot think of any possible explanation of how this was not a case of the team enriching themselves over the back of the community. If there was a good explanation, the tokens would not have to be burned and Daniele de Vecchis would not have to resign.
At this point I can recommend everyone who is providing liquidity on Kaddex to pull out their funds. Kadena uses Pact as smart contract language and smart contracts are upgradeable. The team has shown no respect for the community and it’s not safe to provide liquidity or interact with their contracts. The KDX token is not yet minted, but it will very likely dump on release. Nobody should buy it. I feel very sorry for the people who were duped into buying the public sale of this token because they will have lockups of up to one full year. I encourage anyone remotely interested in Kaddex or $KDX to read the #general channel of their Discord since the 18th of April and see and experience the lack of transparency and communication first hand.
In this paragraph I want to turn to the Kaddex team outer ring, those may include marketing, communications (as far as Kaddex communicates), non-core development, advisors and moderators, basically anyone who did not know about the financial operations of Kaddex. It’s time to asses where you stand, why did you get into crypto and DeFi? By continuing to work for and with the current Kaddex team you condone an atmosphere of contempt for the community, not being transparent and conducting top-down centralised business approach. I don’t stand for that kind of DeFi, I demand transparency and real decentralisation, and I will keep calling everyone out on that.
A fine quote from Don D’Agostino, Marketing Operations at Kaddex. It’s time for Kaddex’ team members to show their true colours. Does identifying bad actors only apply to the community or does it apply to Kaddex team members as well? It’s time to make a choice. If you continue to work for or with Kaddex, you are condoning and protecting malicious actors stealing from the community.
As for Francesco Melpignano, the Kadena ECO and his ties to Redwing Labs and Kaddex, I hope we can get a Kaddex inception story which clearly defines how and up until when Francesco Melpignano was involved in Kaddex. It’s clear that it’s not a couple of people inside Redwing Labs that wanted to do a side project on their own. History on LinkedIn profiles was wiped; there seems to be something to hide. After my article of the 18th of April, many people contacted me, and people like to talk. I admit that this is just hearsay, because I cannot make these names public, but two separate anonymous sources confirmed that Francesco Melpignano was or is indeed involved with Kaddex.
Kadena is wonderful technology and a lot of smart people are working on it, but having the same person in charge of Kadena ECO and involved in the biggest DEX and DAO on the chain and thus also involved with the biggest wallet, X-Wallet, would give of a very bad signal to investors and developers looking for decentralisation. This would make Kadena whole lot less decentralised, defeating the whole purpose of Kadena: having solved the trilemma.
I still hold my Kadena in the hope that the ecosystem and the community can clear up and overcome these issues. The fundamentals haven’t changed, we just need a fresh batch of benevolent actors, a bunch of heroes to save us.
Update 02/05/2022: After 3 articles and 13 days after the initial findings of the double dip were published, Mandrake publishes a more verbose statement of what happened. It’s up to you, the reader, the (potential) $KDX investor, the $KDA community member, to decide if all questions were answered sufficiently or if there are more questions.
On the question as why Francesco Melpignano was listed as team member on the official Kaddex site (archived copy here: https://web.archive.org/web/20220501214321/https://docs.kaddex.com/kdx-intro/v/socials-and-communities/), Mandrake replied that Francesco Melpignano was not yet officially involved, but they were looking to involving Melpignano as advisor. Unfortunately anything revolving around Redwing Labs, why LinkedIn profiles were scrubbed and the K
addex origin story remain a mystery.