The 8,888 supply NFT collection from Malaysia Member of Parliament Tony Pua, the Langkah Sheraton NFT Project, managed to raise RM1.3 million (US$290,000) for political party DAP across 147 wallets. However, on-chain sleuth @pedagang_eth discovered that the value of the total funds on the scanner did not match the expected sales value of a fully minted collection.
He theorized potential misconduct due to the nature of transactions simulating artificial trading activity. This ignited discussions on the legitimacy of the funds raised for DAP and the existence of the donors within the Malaysian web3 Twitter community.
Shortly after the tweet, Pua responded the following morning via DM inviting @pedagang_eth and local NFT community members to have a civil discussion on the matter.
Pua was seen to be calm, relaxed and attentive to the concerns of the community. He explained calmly that Langkah Sheraton is primarily a fundraising project through the sales of a physical painting. He viewed NFTs as a novel tech method to sell share certificates to the ownership of a physical painting.
Leading up to the mint day, he and his team had already managed to fundraise the campaign’s target amount of RM 1.2 million. The majority of the fundraise was received in a bank account instead of being on-chain. As the majority of funds was already in the DAP bank account, the next step was to deliver the purchased NFTs to the respective donors and preserve all funds raised from the project.
To achieve this, Pua and his team executed a wash trading strategy. By repeatedly extracting the MATIC from the mint contract into a custodial wallet, they were then able to redistribute the funds to mint the NFTs across approximately 130 wallets on behalf of their donors. Though the method left a trail of seemingly suspicious transactions, Pua argued that the big picture was not fraudulent.
“I do not dispute the fact that the same set of facts can be interpreted wrongly, which is what took place. To me, that was the easiest way for me to complete this exercise within a month. I’m not doing anything fraudulent because I had actually received the money for the NFT. I have an audit filed and there is an audit trail on both the blockchain and on physical bank accounts,” Pua said.
Pua, who was cooperative and transparent with the community, proceeded to present the data to defend himself against the insinuations of the tweet. The data that was shared were donor chat logs allowing consent, a bank statement of the bank account receiving the funds for the month of August 2022, printed certificates of proof of purchases & an NFT sales agreement term sheet.
When asked why he had not opted to proceed with airdropping the collection to users as a cleaner method instead, he reflected on the difficulties of crypto adoption to people with zero knowledge or zero affinity towards it. According to his tech team, the initial plan was a well-intentioned attempt to educate donors to get on board to blockchain with their NFTs, but the majority of donors had no interest in creating crypto wallets, citing only 10% were interested. The remaining 90% had only interest to donate to DAP.
Blockhead further prodded Pua if he would use the same method for NFT sales again and he said he would not rule out that possibility as he did not see anything wrong with it.
“I think that the facts of the matter are there but the story behind the transactions is unclear. Everyone can see the transactions on Polygon scan but the story behind it requires verification,” the MP said.
The community, who were initially charged with a barrage of questions for the Member of Parliament, seemed appeased with the answers. The dialogue then moved on to talking about the plans of the Langkah Sheraton NFT Project and for their holders.
Shortly after the dialogue concluded, @pedagang_eth tweeted his resolution and commended the community and Pua for a civil dialogue.
Like a true steward, he remained steadfast to his on-chain analysis and encouraged all future on-chain transactions to be better managed to avoid unwanted misinterpretations.
Fair play to both @tonypua & @pedagang_eth for being experts in their own right. One, a visionary pushing the boundaries for mass application, the other a steadfast watchdog for healthy web3 blockchain behavior.