Wonderland Money Sifu Scandal

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Wonderland Money

Wonderland is a DAO which invests funds on behalf of members and has a asset-backed TIME token. One of the founders was Michael Patryn, who has a long and concerning history. This wasn't disclosed to users. At one point, $8.4m of funds were taken out of the multi-sig treasury in order to avoid liquidation (which happened anyway). This created controversy, that ultimately resulted in Michael Patryn's presence being revealed. The community voted to remove him and keep the project going. A significant amount of his funds were subsequently transfered through TornadoCash. It's not clear that any losses have been passed through to users.

This is a global/international case not involving a specific country.

About Wonderland Money

"The Defi WonderLand. Financial tools to grow your wealth - stake and earn compounding interest."

"Wonderland is a DeFi protocol mostly based on Avalanche. It is a fork of Olympus DAO, a decentralized reserve currency protocol that lets users deposit or sell tokens to the Olympus treasury in return for discounted OHM tokens. Wonderland quickly became a famous fork of Olympus. The current treasury balance of Wonderland [stood] at over $735 million, according to its website."

"Wonderland is the first decentralized cross-chain reserve currency protocol on the TIME token. Each TIME token is backed by a basket of assets (e.g., MIM, TIME-AVAX LP Tokens etc etc) in the Wonderland treasury, giving it an intrinsic value that it cannot fall below. Wonderland also introduces economic and game-theoretic dynamics into the market through staking and minting."

"Our goal is to build a policy-controlled currency system, native on the AVAX network and then bridged across different chains, in which the behavior of the TIME token! In the long term, we believe this system can be used to optimize for stability and consistency so that TIME can function as a global unit-of-account and medium-of-exchange currency. In the short term, we intend to optimize the system for growth and wealth creation."

"We intend to achieve price flatness for a representative basket of goods without the use of fiat currency, in order to allow the cryptocurrency industry to detach once and for all from the traditional finance world!"

"Wonderland is a cross-chain fork of Olympus. Our team is mostly anonymous, born from the DeFi Community. We aim at becoming a Decentralized Autonomous Organization, and we are actively working towards that goal." "Currently most of the decisions are taken by the core team, but we expect to be able to turn this into a DAO-governed model as soon as possible!"

"TIME is not a stablecoin. Rather, TIME aspires to become an algorithmic reserve currency backed by other decentralized assets. Similar to the idea of the gold standard, TIME provides free-floating value its users can always fall back on, simply because of the fractional treasury reserves TIME draws its intrinsic value from."

"Each TIME is backed by 1 MIM, not pegged to it. Because the treasury backs every TIME with at least 1 MIM, the protocol would buy back and burn TIME when it trades below 1 MIM. This has the effect of pushing TIME price back up to 1 MIM. TIME could always trade above 1 MIM because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1."

"Wonderland is currently unaudited! It is a fork of Olympus DAO on the avalanche Network, audits will occur at a later stage. Stay cautious!"

"All funds are Sifu. An on-chain sleuth discovered that all was not well in Sesta's Wonderland, and the impacts of Quadriga are far from forgotten."

"Wonderland launched last September [2021]."

"Patryn, a notorious name in crypto trading circles, was one of the co-founders of the endlessly mysterious defunct crypto exchange QuadrigaCX, alongside the (supposedly) deceased Gerald Cotten." "Separate from his involvement in Quadriga, Patryn also pleaded guilty to conspiracy to commit credit card fraud, burglary, grand larceny, and computer fraud."

"According to Dani they met when Sifu/Patryn DM’d him as an early Abracadabra investor. They exchanged ideas and slowly started to work together over time." "Perhaps his interactions with Sifu (unknowingly Omar) made him look past his history. Dani said however he believes in second chances." "Sestagalli claims he met Patryn in an online chat server with other DeFi insiders and decided to work together on his Olympus fork, Wonderland, due to Patryn’s deep knowledge of tokenomics."

"[U]nbeknownst to everyone but Sestagalli, Patryn was serving as treasurer for the hundreds of millions of dollars locked in Wonderland’s treasury, albeit controlling just one multi-sig key." "Sestagalli claims that he knew of Patryn’s past and decided to trust him with one of Wonderland’s multi-sig keys regardless."

"Patryn and Sestagalli had grown close, said Frog Nation’s spiritual leader in a CoinDesk interview." "Eventually, the QuadrigaCX co-founder felt comfortable enough to disclose his past. Sestagalli reckoned he didn’t encounter any red flags while working with 0xSifu, so he considered giving him a second chance."

"Sifu first became known after the Ruler/Cover fiasco when he dumped the treasury on Yearn. Sifu was to blame for a lot of it yet faced lots of backlash at the time." "Sifu [was] accused of taking $8.4m worth of $time from the Wonderland treasury."

"4.25k Time ($8.4m) was transferred from the Wonderland treasury to Sifu's private wallet on 1/15." "He then added it to his collateral on @mim_spell on 1/16 to prevent liquidation." "Sifu still ended up getting liquidated despite this." "This is all on-chain."

"The treasury is secured by a MULTISIG." "They would NOT approve $time taken out to provide his personal funds." "Because it's $time that the team OWNS." "There is a difference between "taking time from the treasury to avoid liquidation" and "staking team token allocation disbursement well before the crash".

"I was not at risk of liquidation when I added those tokens to the Abra position which I have been building since we launched the CDP. As I receive no cash salary, I sell tiny pieces here and there. I have expenses and cover many company costs."

“In my personal opinion, I try to avoid judging people for what they have done in the past. I tried to stick to the experience I had with him, and we had many, many months of working together, talking every day and building successful things together,” said Sestagalli (via CoinDesk, our emphasis).

“I did my own research. I looked into it, I said, ‘OK, there is a young guy who did some credit card stuff — you understand? Some mistakes when he was young. And then there was the Quadriga situation, which is definitely unclear.”

"A vote was called, proving that the “Frog Nation” does not share Daniele’s belief." "Wonderland DAO opened a vote to unseat Sifu on January 27 and passed it with a majority on January 29. TIME token holders with a combined over 64,000 tokens participated in the vote. (One token generally serves as one vote)." "TIME token holders voted in 88% agreement to replace Patryn as treasurer earlier this week."

"While TIME had been tanking for weeks before the revelation hit, word that Patryn had any sway at all in Wonderland’s DAO sent the token to all-time lows almost immediately."

"Despite initially backing Patryn, Daniele Sesta has now published an apology of sorts, and it seems the fate of Wonderland will now lie in the hands of the community."

"Patryn was caught “washing” $2.8 million worth of Ether through crypto mixer Tornado Cash shortly after the controversy broke, indicating he’d exited multiple positions, including Wonderland."

"The vote on winding the project down ended only after a dramatic stalemate, with some investors calling for the project to dissolve and for its treasury of user-contributed funds to be refunded, and others fighting in support of the project. In the end, the grass-roots campaign won by a slim margin, with 55 percent voting to continue. Despite the signal to carry on, what form it will ultimately take is currently unclear."

"At that point, the vote on whether to keep the project alive was around a 50/50 split, and Sestagalli said that the only way forward was to reimburse and unwind those who don’t want to be part of the community, and “find a new home” for those who feel “attached & inline with the Frog Nation Vision,” referring to the community of investors who have gathered around Sestagalli's multiple projects in DeFi."

“I do not agree about continuing this experiment,” he wrote. But then, a few hours later, Sestagalli backtracked and wrote on Twitter that “We will continue building together as a community and get out of the FUD [Fear Uncertainty and Doubt] together.”

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

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• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Wonderland Money Sifu Scandal

Date	Event	Description
January 19th, 2022	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $8,400,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

Having a full background check on team members can avoid any issues with secret pasts. Participants should be made aware of who holds keys to the multi-sig.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.