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Substratum burns through $13 million in ICO funds in two years, lays off staff

Jaime Chacon


Substratum entered the crypto scene in 2017 with big dreams—a vision to recreate a “a free and fair Internet.” And it raised some big money to do it.

The company raked in $13.8 million in a token sale during the ICO gold rush.

Now, Substratum is broke. And some investors are crying foul.

The company announced in a Medium post yesterday that it is now entering a “transition” phase after draining its coffers of the nearly $14 million it raised in an ICO less than two years ago. So far, Substratum has laid off 40 percent of its employees in its Ohio office, and will eventually be closing it altogether, migrating those remaining onboard to their Tennessee location. 

According to the post, however, the crypto startup will press forward through “private funding.”

IEO investors lose millions as the funding mechanism fails to deliver

Among those laid off so far include Substratum’s Technical Lead, Dan Wiebe, who indicated on Twitter that he was let go last Friday. He said he was later offered a short extension, which he declined due to previous plans. Weibe said, however, that he will continue to work on the open-source project as a volunteer and reassured the Substratum community that development will continue. 

“The fate of future development will depend on how many developers there are in the Substratum community and how passionate they are about the project,” Wiebe told Decrypt. “I don’t see any reason yet that the project couldn’t meet its goals.” According to Weibe, four Substratum developers have been extended for a short time.

The Substratum Network aims to make the Internet “a free and fair” place by allowing anyone to share their spare computing resources. Running a Substratum node will reward hosts with the network’s native cryptocurrency, SUB tokens, when they serve content. 

The network consists of a worldwide collection of nodes that provide “secure Internet content” without the need for a VPN or Tor. The idea is to enable users to view Substratum-hosted content in their browsers without having to worry about censorship like government restrictions on content.

But those lofty ideals of standing up for freedom and fighting censorship on the Internet are now being challenged by scorned Substratum investors. 

A recent post on the Substratum subreddit by a concerned user, which outlined the company’s precarious funding situation, was inexplicably removed by administrators. The settings of the Reddit page were then changed to restricted and now only allow approved users to post and comment. 

What’s more, some have taken to outright accusing Substratum of orchestrating an “exit scam,” prompting an official response from the company:

“I'm not an expert in crypto trading, but wouldn't exit scams be pulled when the coin was at its highest value? This is an exceptionally bad time to pull an exit scam,” Weibe is quoted in the post as saying, defending his former colleagues.

SUB tokens are currently worth $0.00986 a piece, according to Messari, down more than 99 percent from its all-time high of nearly $3 per token.