The Litecoin price surged in mid-February on news that LitePay – which purportedly offered both merchant services and an LTC-funded debit card – would launch later in the month. This would have allowed companies to accept payments in Litecoin with the debit card from all over the world. LitePay would have allowed companies to accept Litecoin payments by settling them directly through their banks. It was expected to widen the adoption of the altcoin and generate greater merchant interest in Litecoin.
This plan didn’t come to fruition. Nevertheless, Charlie Lee and the Litecoin Foundation endorsed it. Both had to apologize for failing to conduct due diligence on the LTC-based payment processing startup LitePay, once it failed to deliver. This sparked allegations, including some pointing towards the possibility of an exit scam due to its abrupt closure.
On March 26, 2018, the Litecoin Foundation announced that a few days before, Kenneth Asare, CEO of LitePay, informed them that he has ceased all operations and is preparing to sell the company. Kenneth asked the foundation for more funds to continue operations. The foundation refused any further funding as he was unable to provide satisfactory reports regarding previous expenditures; Asare refused to go into details about the company and show objective evidence to back up his statements.
Lack of Transparency
The Litecoin foundation had approached Asare earlier regarding the lack of transparency with which he as operating. The foundation also to expressed concerns regarding his recent Reddit AMA. The foundation stressed that Litecoin was doing “Perfectly fine” without LitePay and that it will continue to do so now that the company’s claims have been proven false.
The foundation said that failure of a project is a natural and common thing when investing in startup ventures, especially when it comes to cutting edge technologies such as cryptocurrency applications. They also stressed that failing to conduct their due diligence was problematic. Based on this lesson, the foundation is now working hard to tighten due diligence practices and ensure that such events do not happen again. The Litecoin foundation issued an apology for adding to the hype around LitePay when it was first announced in February.
Litecoin Foundation also stated that if its employees or its volunteers tweet or retweet about a business it does not mean that the foundation endorses it, no does it indicate that the business model has been thoroughly reviewed. This sounds as if the foundation was trying to relieve itself from the current controversy. It also sounds like the foundation does not want to be held accountable for everything it promotes, which in the past, has contributed significantly to Litecoin pumps.
Charlie Lee got into a similar questionable endorsement problem with LitePal, which is supposed to be a Litecoin first payment system that resembles PayPal. With it, merchants from all over the world can do streamline payments in a simple, less confusing manner. LitePal is expected to be released later this year. According to the official website, users will be able to use the service with PayPal, Western Union, Bitcoin and Litecoin, and the fees will be “bumpy low”. Apart from the vague worded landing page, there is not yet any information about this service.
The founder wants LitePal to provide a means for merchants and buyers alike to transact using Bitcoin and Litecoin. He stated his specialization and interest in cybersecurity will allow LitePal to protect digital assets using cutting-edge technology, which is paramount for companies in the cryptocurrency space. Lee seemed to endorse LitePal in a tweet in February.
Is LitePal a Scam?
Since Litecoin activated SegWit and it got listed on Coinbase, more people are drawn to this altcoin. Any big news regarding Litecoin was taken as a sign of its growing adoption since, and the Litecoin foundation was seen promoting many of such projects which according to some were not verified properly.
There were many members in the community who were raising concerns about LitePay even when some of their peers were advertising them and promoting their product as a revolution and a huge step towards mass Litecoin adoption. Some feel that every Litecoin related failure adds up and makes it harder for the legitimate businesses to succeed.
The Open Source Project Argument
According to Charlie and Litecoin Foundation this is an open-source project. Anyone can build on top of Litecoin. It is continually growing with support from many others with market ready products joining the space and fulfilling their promises to make it easier for the world to use Litecoin. But the concern that many have raised is that while Litecoin was doing perfectly fine before, after these scam allegations surrounding LitePay & LitePal the community might be more reluctant to continue supporting the foundation and its founders.
Other foundations have squandered their funds by funding questionable projects and due to financial mismanagement. It has been a common phenomenon we have seen often in the crypto space. Hence it is necessary to demand that the leaders of the Litecoin foundation and other crypto foundations in general, improve on financial transparency, governance and due diligence mechanisms.