Reddit Mods Accused of Insider Trading Before Blockchain Program Ends

On 17 October 2023, Reddit declared the discontinuation of its blockchain-based Community Points beta program, including the Special Memberships feature. The termination is slated to occur by 8 November 2023. The announcement was made in the “r/CryptoCurrency” subreddit by “u/cozy__sheets”, a member of Reddit’s Community team, who cited scalability issues and regulatory challenges as the primary reasons for discontinuing the program. Reddit acknowledged that the Community Points initiative had shown promise and had received robust support from both moderators and community members. However, the program was not designed to be scaled across the entire platform, making it unsustainable in the long term.

The company also elaborated on the impact of the regulatory environment, stating that it further complicated the already challenging scalability issues. Despite these setbacks, Reddit said it remains committed to the core objectives of the Community Points program, which aimed to enhance community governance and empower user contributions. As a replacement, Reddit is introducing a new Contributor Program that will allow eligible users to earn cash based on their karma and gold earned from qualifying contributions.

The timing of the decision was also addressed. Reddit is currently in the process of rolling out an improved user interface and experience. The company realized that incorporating the Community Points program into this new framework would require an excessive commitment of resources. As a result, Reddit will now focus on more scalable and resource-efficient programs, like the Contributor Program. The announcement concluded by stating that all existing points in community tanks will be nullified, commonly referred to as “burned,” by the end of the year.

This announcement led to a wave of criticism and suspicion within the cryptocurrency community, as the value of subreddit-specific tokens plummeted following the news.

As a report by Cointelegraph explained, Reddit’s community points program featured unique tokens for different subreddits. For instance, the Moons (MOON) token was designated for the r/CryptoCurrency subreddit, while the Bricks (BRICK) token was allocated to the r/FortNiteBR subreddit. Reddit users could use these tokens to purchase badges and special avatar items.

Initially, subreddit moderators stated they were not informed about Reddit’s decision to terminate the program. However, Cointelegraph’s report says recent on-chain data analysis has cast doubt on these claims and that evidence suggests that some moderators, who were in possession of Moons, might be connected to wallets that sold large quantities of the tokens just before the announcement.

Pledditor, an on-chain analyst, was among the first to highlight suspicious activities involving a subreddit moderator known as u/Mcgillby.

Their report went on to say that according to on-chain data, this moderator moved over 100,000 MOON tokens in two separate transactions on the Arbitrum Nova blockchain. These transactions were converted into more than $23,000 in Ether. Following these actions, the user deleted all previous Reddit posts.

Moderators of the CryptoCurrency subreddit later issued a statement, claiming they were informed about this decision just an hour before the public announcement.

Firstly, the moderators reassured the community that their Moons tokens are secure and will not be destroyed. They emphasized that the smart contract’s transfer functionality will remain operational. Reddit will be relinquishing its control over the contract, and its share of the tokens will be nullified by 8 November 2023, along with all features related to points.

The CryptoCurrency subreddit moderators also revealed their plans to sustain the Moons tokens independently of Reddit. They are considering two primary options: either taking over the ownership of the smart contract, if feasible, or introducing a new token that would be airdropped in a 1:1 ratio with current Moons balances. The final course of action is yet to be determined and is contingent on Reddit’s internal decisions. However, the moderators are open to community discussions to collectively decide the way forward.

Regarding administrative involvement, the moderators stated that it has been minimal lately, limited to tasks like compiling karma data, posting CSV files, hosting governance polls, and overseeing token distribution. They highlighted that most features related to Moons, such as rule modifications for the subreddit, custom Moon balance flairs, AMAs, banners, and the community-built, do not necessitate moderator intervention.

Lastly, the moderators assured that all existing reservations for AMAs and banners will be honored as planned.

Featured Image via Midjourney

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