Many clients and supporters of Otonomos have expressed concern about the events reported in our recent Medium post and have asked how they can help.
OTONOMOS IN A TAILSPIN
Up until late September this year, Otonomos was on a very promising trajectory with consistent client and revenue growth, effectively reaching profitability within the first full year of its operations.
However, the recent actions by 3 Members of the Board to seek to remove me as CEO with the calculated aim to take control of the business have since put Otonomos in a tailspin.
With every passing day, value is seeping out of the business, as both clients and new investors are standing on the sideline until a solution is found.
Everybody recognises that such solution should involve the current Board stepping down.
In addition, people expect Dymon Asia Ventures, a small Singaporean VC on the Company's Board whose modus operandi was exposed, to fall on their sword and leave as a shareholder.
A RESCUE CAMPAIGN FOR OTONOMOS
As reported, we have now taken the first legal steps to force this outcome. To help our cause, we are now also opening a campaign so everybody can easily and anonymously contribute to Otonomos' rescue by sending Ether to a dedicated wallet.
Your contribution will help in two major ways:
1. Reinstate the rightful stewardship for Otonomos
The immediate goal of the rescue campaign is to reinstate the rightful stewardship for Otonomos, so the company can move forward with a new Board under new rules.
Part of your contributions will therefore be used to fight our legal case and we will use our Telegram channel to keep you posted on progress.
Everybody who contributes will be given the option to invest on preferential terms in a next fundraising for Otonomos or its successor via a Simple Agreement for Future Tokens. See our FAQs below for more information.
2. Help fund R&D towards a new decentralised organisation for the community
Beyond our immediate legal agenda, we believe the sorry saga at Otonomos shows the urgent need for a new, decentralised organisational and governance model.
With ICOs now increasingly seen as share offerings, the risk of bad actors booby-trapping your company by using stealthy voting locks and unfair governance mechanisms to predate on your efforts and ultimately gain control over your idea remains as acute as ever.
With your contribution, you can help restore Otonomos' original mission of building a decentralised organisation with legal recognition, in which governance and voting is "smart-contractified" and fairness and shareholder participation hard-coded.
HOW DO I CONTRIBUTE?
To contribute, simply send Ether to the address above. Make sure you only use the address posted on https://otonomos.com and only use wallets that support ERC20 tokens.
JOIN OUR TELEGRAM CHANNEL
Our fight is your fight! Join the Otonomos Telegram channel to contribute to our cause and share ideas or questions.
The Simple Agreement for Future Tokens (SAFT) is a next-gen elaboration of the Simple Agreement for Future Equity (SAFE), a simplified convertible note which over the last years has been widely used across Silicon Valley especially with some of the leading incubators there. Under the leadership of Cooley, the Valley legal firm, the SAFT converts into tokens which may represent shares of the company in a qualified token offering.
The actual ETH contributions will be used in the same way proceeds of a SAFT are currently used, such as working capital and expenses, and in our case can also be used towards litigation costs.
Everybody will be able to see the wallet's contents via Etherscan as well as the withdrawals made, which will be limited to Coinbase if and when fiat payments need to be made to cover costs.
Under the SAFT, everybody who contributes to the Campaign will have the option to convert their contribution into tokens in Otonomos or a successor entity. In simple terms: Your contribution is essentially the Purchase Amount under a SAFT if you decide to exercise your option to convert.
To exercise this option, at the time of the SAFT raise you will be asked to sign a standard SAFT agreement in substantially the same wording as the template provided by the Saft Project. Subkecty to further legal advice we are taking, this may require you to KYC and accredit yourself, as the tokens represent an economic interest in the business and are likely to be seen as securities. All this will be done on blockchain, which is why you need to contribute from an ERC20 wallet.
Example: Say you contributed the ETH equivalent of USD 50,000. The SAFT agreement will show you are entitled to convert the ETH amount of your contribution into tokens at the discount rate specified (likely to be around 20%).
If you decide not to exercise, or are cut down in size (see below), all (or part) of your contribution will be sent back to the ETH wallet you originally used to make your contribution.
In principle your entire contribution will count towards your Purchase Amount under the SAFT.
However we do reserve the right to set a ceiling on the amount we raise under the SAFT. If we raise less than the total amount of contributions made, everybody will be cut down propertionally and their balance will be paid back into the wallet they sent their ETH from.
For example: say we raised ETH 10,000 in total contributions, and your contribution was 100 ETH. We decide to only raise ETH 5,000 via SAFT, half of the total contributions received.
If you decide to convert under the SAFT, your Purchase Amount will be ETH 50 and ETH 50 will be sent to your wallet.
We do not believe that Otonomos' business model needs an appcoin: At this stage, we feel that people who use our services should not be asked to first buy a special token to access them. This may change once we truly reach jurisdictional escape velocity! For now, the tokens will represent an economic interest in the business and will come with voting rights to broaden shareholder participation.
You will be repaid your contribution minus your pro-rate share in the Litigation Costs (see below).
Example: Say you contributed ETH 100 out of a total ETH 10,000 in pledges, or 1% of the total. The total Litigation Costs are ETH 1,000. If you convert under the SAFT, your entire ETH 100 will count towards the Purchase Amount. However, if you decide not to convert, ETH 90 will be sent back to your wallet (reduced for your pro rata share in the Litigation Costs).
During the legal procedure, we have been advised that the correct procedure prescribes that action against the Directors is taken via a claim against the Company, even if ultimately the Directors can be held personally liable. Hence, the contributions accrue in a special-purpose wallet. However, contributions will convert into tokens under the SAFT in Otonomos if the outcome of our legal action is successful, or a successor entity.
In summary, there are two parellel legal actions.
A first is related to employment matters in which we demand a judge in the Singapore High Court to find that Founder was unlawfully terminated as CEO of the Company. This would mean all actions taken by any interim CEO since late September would be null and void.
The second action is an arbitration process under the shareholder agreement in relation to the Board's alleged unlawful actions and breach of fiduciary duties.
Here, part of a successful outcome would be that Founder regains control of the Board and cannot be outvoted. We also believe some shareholders' positions are untenable and they should leave. This would then open the way to a more enduring solution for Otonomos, which may include the appointment of a different CEO with Founder consent.
Note that under the arbitration, public courts can be asked to impose specific injunctions.
The outcomes above could also be achieved via a negotiated settlement outside of the courts.
We believe people will ultimately recognise what is right for the company. However in case we do not achieve all or some of our objectives under the Litigation we envisage there will be a successor company and in this case contributors will be given the option to use the SAFT mechanism (see above) to subcribe for tokens in the successor company.
No, as contributor you are not part of any claims or counterclaims. In any event, contributions are anonymous with only the public address from where you have sent ETH as possible identifier.
Yes provided you keep it confidential as public disclosure could leave us - and possibly you - open to defamation and libel actions by the Defendants. Simply let us have your email via the Telegram channel and we can send you a copy of the Confidentiality Agreement. Once signed, we can send you a copy of the Claim and other relevant documents.
“Litigation” refers to the legal proceedings and any and all claims, actions and/or proceedings relating to or arising from the Claim against Defendants or proceedings in connection therewith and any new proceedings against any or all Defendants that may arise from the Claim.
“Litigation Expenses” include (i) fees due to the Lawyers; (ii) any fees or expenses, including Claimant’s, incurred in connection with obtaining or collecting the Litigation Proceeds (including any contingency fees), and (iii) recoupments or set-offs of any kind, including any recoupments or set-offs in respect of any counterclaims or cross-claims asserted against Claimant by any party.
With USD 100,000 in lawyer fees we should be able to get a lot done, however we may have to spend more, and there will be ancillary costs. We'll use the Telegram channel to regularly post on legal spend.
In case the Litigation Expenses exceed the total amount of contributions, all contributions will go towards covering the litigation costs, however those contributors who opt to covert under the SAFT will still be able to do so up to the amount of their contribution if there is a next fundraising. In such case, whilst your contributions may have been fully used to cover legal expenses, you will get tokens in return.
Under Singapore law, crowdfunded third-party litigation funding is not permitted. As a result, the contribution campaign cannot be structured as a % sharing in the litigation proceeds.
This is why we give Contributors the option to convert their contribution under the SAFT into tokens of Otonomos or its successor company or have their contributions sent back to their respective wallets. In the latter case, the repayment is net of the contributor's pro rata share in the Litigation Costs.
In this context, "Litigation Proceeds” is defined as any and all consideration actually paid directly or indirectly to or for the benefit of Claimant by Defendant or received directly or indirectly by or for the benefit of Claimant from Defendant in connection with the Litigation (whether by judgment, settlement, licensing or otherwise), including any damages (punitive or otherwise), penalties, interest and other amounts paid or property transferred in respect of the Litigation.
The EGM is in theory a conflict resolution tool in which shareholders' voting weights should ultimately be able to decide matters including Board composition, however Otonomos' shareholder agreement has been booby-trapped by the two small VCs whose consent is required to have them vacate the Board and on other reserved matters.
So whilst an EGM is likely to be held soon, we do not expect it to bring a solution as the two small shareholders who presently occupy a Board seat are essentially judge and jury in their own case.
It is precisely because they hold the company to ransom that we have no other choice than litigation.
I still have a Board seat as majority shareholder, however as long as the 2 VCs and interim CEO sit on the Board, Founder can be over-ruled on all important matters.
First, on the advice of my legal team, I was never ousted from Otonomos.
As a result, I retain access to the domain. Upon my alleged termination, a copy of the site was hastily and unnecessarily created (otonomos.io) which has confused clients: the site and the dashboard could have remained at otonomos.com without interruption. However, now that the original site was cloned, we feel justified in taking back otonomos.com.
IMPORTANT: do *not* rely on any emails from email@example.com or any .io address that claims to send email in Founder name.
Second, I always owned the domain, which was registered back in 2014, in my personal name, and the brand and logo are personal trademarks. The domain has always belonged to me personally and that has always been accepted by the Company, or condoned by use.
Telegram (@otonomos) is best for now, or Twitter (@otonomos) for general broadcasts.
It is easier to answer this question in the negative:
1. The Campaign is NOT third party litigation funding under the Singaporean Civil Law (Amendment) Bill 2016 but a pure donation towards Otonomos' cause in return for an option to participate in the Company's or its successor's next funding round for an amount equivalent to the Contribution made, or to receive your Contribution back. In this respect, the SAFT mechanism is in no way linked to the size of a possible award as a result of the legal proceedings.
2. Secondly, the Campaign is NOT in any way an offer for securities in Singapore or abroad, but a pure pledge to come to Otonomos' rescue by providing ETH contributions towards the specific agenda of restoring the rightful stewardship at the Company and to help cover the cost of the actions necessary to achieve this outcome. The Campaign does not constitute an offer to enter into a SAFT and the terms of the SAFT are yet to be defined and may not constitute an offer for securities. By sending ETH towards the campaign, Contributors are not purchasing securities or in any way entering into an investment agreement, and the campaign is not a solicitation to enter into such an agreement.
TSMP Law Corporation (Co. No.: 200103608E) having an address at 6 Battery Road, Level 41, Singapore 049909 and/or any substitute or additional legal counsel engaged by Claimant with respect to the Claims or the Litigation.
We retain the sole discretion to close the Campaign latest on the day before we expect a definitive decision to be reached in the legal proceedings.
The amount of contributions is in principle unlimited ;-). However we have the discretion to close (or reopen) the Campaign at any level. We do not believe Otonomos or its successor needs ICO-type amounts to get back to profitability!
IMPORTANT DISCLAIMER: The Campaign is NOT third party litigation funding under the Singaporean Civil Law (Amendment) Bill 2016 but a pure donation towards Otonomos' cause in return for an option to participate in the Company's or its successor's next funding round. In this respect, the SAFT mechanism is in no way linked to the size of a possible award from the legal proceedings. Neither is the Campaign in any way an offer of securities in Singapore or abroad, but rather a pure pledge to come to Otonomos' rescue by providing ETH contributions towards the specific agenda of restoring the rightful stewardship at the Company and to help cover the cost of the actions necessary to achieve this outcome. By sending ETH towards the campaign, Contributors are not purchasing securities or in any way entering into an investment agreement, and the Campaign is not a solicitation to enter into such an agreement.