After three years of waiting, a "witchcraft verdict" has been handed down! Major shareholders are taking collective legal action, and Backpack is urgently stepping in to "put out the fire."

Author: Nancy, PANews

After three years of being nominated, she was ultimately awarded a "witch verdict."

On March 23, the long-awaited Backpack exchange finally launched its TGE (Trading Token). However, amidst a deep bear market, Backpack delivered no surprises; the price plummeted from the opening bell, and its current circulating market capitalization is less than $200 million. What alarmed the community was widespread "anti-fraud" behavior. Key community members complained in their groups that those labeled as "witches" included both retail investors with consistently small transactions and large traders dominating the trading volume charts. With the rules never disclosed and the rulings enforced unilaterally, Backpack experienced a severe crisis of confidence and was forced to urgently open an appeals channel on March 24.

"When the market is good, you're profiting from other people's profits; when the market is bad, you're profiting from the project itself." Someone succinctly pointed out the crux of the problem. With Opinion and Backpack's consecutive airdrops leaving many profit-seeking communities empty-handed, it effectively signaled the end of the profit-seeking race, with some veteran profit-seekers even announcing their retirement.

KOLs are not immune to backlash either, with Chinese online communities being the hardest hit.

The promise of "pure community allocation" ultimately turned into a large-scale anti-scam event.

Yesterday, Backpack finally opened the token distribution channel for BPs. According to the previously announced rules, 25% of the total token supply in this TGE (approximately 250 million BPs) will be allocated entirely to the community, with 24% allocated to points holders and 1% to Mad Lads NFT holders. The official statement emphasized that all tokens except for this portion belong to the community, and no team or investor shares are involved in the initial circulation.

However, when the redemption channel opened, it dealt a heavy blow to the community users. Many users found that their points had been significantly reduced, or even completely wiped out, ultimately receiving only a symbolic participation reward, or even nothing at all. What's even more infuriating is that most of these users who were penalized were not peripheral accounts, but rather long-term active single-wallet users, high-point farmers, and Mad Lads NFT holders—core participants.

Anger quickly spread throughout the community, especially among Chinese users, who became the hardest hit by this witch purge. Numerous complaints from large investors and key opinion leaders flooded the community: "4 billion USD trading volume, 100% witch rate," "Over 1.5 billion USD trading volume, 800+ hours spent, over 300,000 USD in fees, but the airdrop was only half price," "330,000 points for 2,000 coins," "Number one in trading volume across the entire network, 170,000 points for only 20,000 coins"... Behind these numbers lies real financial investment and time commitment, yet in the final distribution, they were all categorized as witches and disqualified.

What amplifies the dissatisfaction is not just the disparity in returns, but also the denial of their contributions. Among these users, some have maintained long-term communication with the project team, some have continuously produced content to endorse the project, and some have actively participated in community acquisition and ecosystem expansion, but these investments have not been included in any weighting considerations and have instead been erased.

Even more controversial is the collective punishment approach. Some community team leaders responsible for community growth and expanding the ecosystem not only faced removal themselves, but also their invited users were affected. This punitive mechanism turned the growth logic that relied on social fission into a source of risk.

Moreover, the rapid decline of the BP token after its listing amplified the overall losses and exacerbated the negative sentiment in the market.

The crux of all the controversy lies in Backpack's lack of transparency in its rules.

Backpack has never publicly disclosed its criteria for identifying fraudulent activities, instead continuously upgrading its risk control mechanisms throughout the process. Just before TGE, Backpack not only required all accounts participating in the points program to complete KYC (Know Your Customer) procedures, but also conducted a large-scale review under the guise of "purifying the environment and rewarding genuine users," ultimately identifying over 50 million points derived from fraudulent activities, which were then uniformly reclaimed and redistributed. However, for users, there have always been no clear answers regarding what constitutes fraudulent behavior, the criteria for judgment, and where the boundaries lie.

Can returning points and initiating token compensation rebuild trust?

Under public pressure, Backpack urgently took action to "put out the fire."

Claire, a member of the Backpack team, responded on Twitter, saying that the Backpack Chinese team had held intense discussions with the European and American teams overnight. The Chinese team did not want to see the interests of users who had previously supported them affected, and had in-depth communication with the person in charge of implementing the anti-Sybil campaign.

As an experienced compliance professional, Claire stated that in the anti-Symania team's logic, "single person, single account" is the absolute bottom line. Under this standard, compared to other regions, more Chinese-speaking users have indeed been affected, which is due to inherent differences in user habits. The strict adherence to rules and sensitivity to KYC information by users in Europe and America means that multi-account behavior is beyond their comprehension. In the subsequent handling, Backpack founder Armani and the core team are preparing to immediately open an appeals channel and establish clear rules to protect user interests to the greatest extent possible.

Subsequently, Backpack's Chinese account announced the opening of a manual appeal channel, allowing users to submit materials for review. They also announced that they would follow "Rule No. 3": if the same device operates three or fewer accounts and is deemed a "witch," after verification through manual appeal, more than 50% of the points will be refunded. Furthermore, the Backpack team plans to launch a special program in the coming days to buy back tokens on the secondary market for targeted compensation to eligible users.

However, for users who were once fully committed, these remedies may make up for some of the losses, but once trust is broken, it is very difficult to rebuild it easily.

Lock-up period of one year in exchange for equity? Backpack bets on IPO narrative

Historically, most crypto projects experience a surge in price after their token launch, followed by a decline and ultimately, inevitable obscurity. Against the backdrop of a crypto bear market, Backpack chose to bet on an IPO narrative before officially launching its tokens, aiming to boost market confidence.

In February of this year, Backpack CEO Armani Ferrante stated that the company adheres to a core principle in its token economy model: preventing insiders from dumping tokens on retail investors. No founder, executive, employee, or venture capitalist should acquire wealth through tokens until the product achieves "escape velocity." For Backpack, the answer to "escape velocity" is clear: the company plans an IPO in the United States.

This means that the token's value capture will be re-anchored and closely tied to the company's overall valuation. Amid this, according to a recent Axios report, sources familiar with the matter said that Backpack is in talks to raise $50 million at a pre-money valuation of $1 billion.

Backpack also demonstrated its "sincerity" in unlocking tokens. In addition to unlocking 37.5% of the tokens in stages according to key milestones before the IPO, Backpack will also put the remaining 37.5% in the company vault and lock it for at least one year after the IPO, with team members holding only company equity.

In addition, Backpack announced that it will allocate 20% of its equity to offer users who have staked BP tokens for at least one year the opportunity to exchange their tokens for company equity at a fixed ratio. Backpack also recently launched an on-chain IPO share allocation feature, allowing users to directly obtain IPO shares through the platform and opening up a waiting list for registration.

However, specific details regarding the token-for-equity swap remain undisclosed, including the swap method, scope of rights, and timeline. This has raised concerns within the community, who believe it could be a new form of manipulation, locking users in before gradually fulfilling promises and using equity swaps to buy the project more time to survive.

Armani Ferrante has also revealed that the IPO might be coming soon, or it might not be so soon, or it might not even be possible at all. But in any case, he and his team will do their best.