On August 26, a long article by Crypto Leaks broke the news about Ava Labs (Avalanche development company) "Shocking melon”。

According to Crypto Leaks, Ava Labs reached a secret cooperation agreement with an American law firm named Roche Freedman a few years ago—Ava Labs paid Roche Freedman a large amount of Ava Labs equity and AVAX tokens (now worth hundreds of millions of dollars), Roche Freedman helped Ava Labs launch malicious lawsuits against competitors such as Binance, Solana Labs, and DFINITY Foundation, and used the law to help the chief Executive Emin Gün Sirer to deal with some personal grievances.

In the article, Crypto Leaks posted a large number of video materials that seem to be taken from unusual angles (but Crypto Leaks emphasized that all video evidence is applicable to legal rules), and the video is a conversation between Kyle Roche, the founding partner of Roche Freedman, and others content. These "first-hand information" from Kyle's mouth further corroborated the revelations of Crypto Leaks.

Briefly summarize the whole incident.

In August 2019, the newly established Roche Freedman moved into a co-working space, where Kyle met Ava Labs and Emin Gün Sirer.

Subsequently, Roche Freedman reached the aforementioned secret agreement with Ava Labs and received a huge commission (stock + tokens) from Ava Labs.According to Kyle's disclosure in the video, he is the first person other than a16z to acquire Ava Labs stock, with a shareholding and currency holding ratio of about 1%, and the current total value is as high as hundreds of millions of dollars.

It should be emphasized that since the transaction did not choose cash, which is the normal payment channel for legal services, this is a completely shady "underground transaction". In addition, the financial attributes of stocks and tokens (which can appreciate) will also make Roche Freedman Tightly tied in the same boat as Ava Labs.

In exchange, Roche Freedman adopted some special strategies that Kyle himself admitted as "not a normal practice of lawyers", and launched malicious lawsuits against some project-related entities that constitute direct competition with Avalanche, such as the aforementioned Binance, Solana Labs and DFINITY Foundation and more.A few months ago, Kyle said that Roche Freedman was enforcing more than 25 class actions.

Through Roche Freedman's legal attack, Ava Labs has benefited indirectly at three levels.

One is to "steal" a competitor's trade secrets.Based on a special legal process known as "discovery", the party who refers to the lawsuit has the right to request access to some core business information of the party being sued, such as secret accounts, investor lists, cooperation agreement contracts, payroll, social media communications, etc., so there is reason to suspect that Ava Labs, with the help of Roche Freedman, has access to many of its competitors' confidential data.

The second is a direct blow to competitors. On the one hand, legal proceedings will have a serious impact on the reputation of other competing projects, and on the other hand, it will seriously distract them from their work. Once they lose the lawsuit, they will face high pressure of fines.

The third is to divert the attention of regulators. In this regard,Kyle proudly pointed out in the video that Avalanche has not been sued so far because of his efforts, because he will ensure that the SEC and CFTC always have something more worthy of attention.

From the video, we can clearly capture Kyle's complacency (earning hundreds of millions of dollars after all).He claims to be a top 10 encryption expert in the world because he has sued half of the projects in the market; he claims that the court jury is 10 "idiots" and he can easily turn them around; of course, The title "idiot" isn't reserved for juries, but for the plaintiffs who helped Roche Freedman file the lawsuit -- thousands of losing investors.

It’s worth mentioning that Kyle also excitedly mentioned a personal vendetta involving Gün. Gün has an enemy of a media person from Turkey (also Gün’s hometown). In order to help Gün “revenge the snow marks”, Kyle took advantage of the media person’s tricks while he was on a business trip in the United States to get him involved in the judicial troubles in the United States . Kyle said that Gün would review the video of the arrest every month afterwards... This incident deepened Gün's trust in Kyle.

With the deepening of the cooperation between the two parties, Kyle even thought about using his "strengths" to create a little business in the Web3 world. Crypto Leaks revealed that Kyle and Gün plan to do a new product called an "Initial Litigation Offering (ILO)" on the Avalanche chain. Through the product, lawyers like Kyle will be able to file class action lawsuits, and investors will be able to fund proposed lawsuits by purchasing tokens to share in potential gains from out-of-court settlements and successful lawsuits…

Unsurprisingly, the disclosure of Crypto Leaks, a "shocking melon", quickly caused an uproar in the entire cryptocurrency world, and many parties involved have also responded to the incident.

Gün himself responded that Ava Labs did not conduct malicious attacks on competitors. "We will never engage in the illegal, immoral and utterly wrong actions claimed in these self-serving videos and inflammatory articles. Our technology and team speak for themselves."

Changpeng Zhao also responded that he was not sure whether the video and news that Ava Labs and Roche Freedman cooperated in malicious competition were true., adding that Binance is not even a competitor of Ava Labs. This response is very interesting to think about carefully. Is CZ trying to say that exchanges and public chains are not the same? Or do you want to say that Avalanche does not pose a threat to BSC? This is a matter of opinion.

What needs to be clarified is that the content disclosed so far is only the words of Crypto Leaks, and the so-called evidence is only Kyle’s unilateral statement. It is still to be verified whether it is fake or not.

But I have to admit,This revelation of Crypto Leaks has revealed the other side of competition in the encryption world for us. Previously, the market paid more attention to the competition of various projects above the water surface, such as technical routes, ecological data, marketing reputation, etc., but ignored the complexity of commercial competition below the water surface.Although the project itself can be advertised as "technology-neutral", for commercial entities that are highly bound to project development, they have sufficient incentives to take various means, overtly and covertly, to boost the value-added of their projects. In addition to the turmoil of Ava Labs, there were also malicious marketing rumors about the leading exchange FTX in the market not long ago.

The reason for this successive occurrence, aside from the specific motives at the micro level, may also be due to the market cycle from a macro perspective.We believe that Crypto will inevitably be a long-term incremental market, but with the continuous decline of the market and the slowdown of external capital inflows, the market has entered a relative stock game stage in the short term, At this time, the competition strategy of the project party will inevitably be different from the stage of "Hello, Me, Hello everyone", and the relative "hostility" will also increase by three points.

However, from the standpoint of practitioners, we still hope that the project party can choose a more benign competition route.The seeds of Web3 are still immature. Those projects that are really bringing innovation to the industry should not die under deliberate slander, and fooling the regulation can easily lead to fatal backlash. "Dirty hands" may be able to exchange for a temporary "Win alone", but in the end it is more likely to usher in a "lose together" ending.

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Update August 30:

In response to the incident, Kyle has issued a document denying any secret agreement with Ava Labs and accusing Cryptoleaks of making false statements and illegally obtained, highly edited video clips.
Kyle claimed that the video posted on the Cryptoleaks website was recorded without his consent during a private meeting with Christen Ager-Hanssen, who now knows that Christen did it for Dominic Williams, founder of the DFINITY Foundation. Last October, Roche Freedman filed a class action lawsuit against Dominic and his DFINITY Foundation.
"The statements in the video are false and were obtained through deception, including the use of leading questions to deliberately trick me into taking advantage of my scheme," Kyle said.

Ava Labs founder Emin Gün Sirer issued a "Statement Against Cryptoleaks' Lies," stating that "the allegations made on the Cryptoleaks website are false."

"Ava Labs did not interfere with Kyle Roche's selection of cases, and did not receive material or information from Kyle Roche. Nor did Ava Labs retain Kyle Roche in its legal affairs. He represented Ava Labs in defense only in several common corporate contractual disputes, His firm is one of a dozen law firms we employ for tax, corporate, regulatory, and HR related matters. Kyle Roche litigates all litigation independently of us and is not responsible for Ava Labs' regulatory matters...Kyle Roche Not on our executive team, we don't turn to him for advice other than the little things he used to represent us on. He has no say in our business decisions, legal decisions, how the company is run or has anything to do with the Avalanche agreement .He only worked on some cases that were not important to us."