0L Network Hard Fork Causes Million Dollar Loss for Trader

UPDATE: “Cointelegraph failed to investigate this person’s claims and motives sufficiently, and the assertions made in the article have brought negative attention to the project, which is entirely unwarranted, and for which the Editorial team at Cointelegraph extends its most sincere apologies.”

In a recent upheaval within the cryptocurrency sector, a trader known only by the pseudonym NN reported a substantial loss exceeding one million dollars due to a controversial hard fork in the 0L Network.

Hard Fork Aimed to Address Insider Exploit

The fork, executed by the team behind the 0L Network which trades under the ticker $LIBRA, aimed to address issues caused by a discredited core team member. This drastic measure resulted in the deletion of 4% of the total Libra tokens, adversely impacting several holders, including NN, who had purchased tokens nearly two years prior.

NN, who bought 147 million Libra tokens in February 2023 for about $1.47 million, had joined the protocol’s marketing team shortly after his purchase. Despite his involvement, he found himself among the victims of the fork. He expressed dismay over the team’s handling of a known bug that had been exploited for over two years. According to NN, insiders used the bug to unlock vested tokens prematurely by spreading them across several wallets, a practice that went unaddressed until the token gained substantial market value.

Token Value Plummets After Hard Fork

As of mid-May, Libra’s market value had plummeted by over 58% since the start of the month, with prices hovering just above $0.001, based on data from CoinGecko. This decline in value has exacerbated the losses for token holders like NN, who lamented the ongoing manipulation and lack of accountability from the team managing the Libra token.

The hard fork was prompted by a smart contract vulnerability that the team knew about but initially disregarded due to the token’s previously low value. When the token’s value increased, the team opted to act, choosing to fork out the wallets believed to have exploited the vulnerability rather than fix the loophole.

NN highlighted the flawed approach taken, noting that the team was aware that innocent parties would be caught in the crossfire, making it impossible to trace back all the involved tokens. The blacklist used to execute the fork was compiled using an algorithm developed internally, raising concerns about transparency and fairness in the process.

Complicating the situation further, NN’s wallet was specifically targeted and excluded from the network due to transactions involving a single validator branded as rogue by the team. Other affected users reported similar exclusion and were also removed from the community’s Discord group, indicating a broader impact on the community.

Founder’s Past Casts Shadow on Project

Adding to the controversy, there were allegations linking Lucas Geiger, founder of the OpenLibra project and co-founder of Wireline, to the pseudonymous lead designer of the 0L Network known as 0D. Geiger had previously faced charges from the United States Securities and Exchange Commission (SEC) over fraudulent activities related to another project.

In March 2018, Wireline raised $20 million for developing a decentralized network that never materialized, and the promised WRL ERC-20 tokens were not distributed to investors. The SEC’s actions culminated in January 2021 with a $650,000 fine against Wireline for an unregistered securities offering and related fraud accusations concerning a subsidiary based in the Cayman Islands.