The maturity is being exchanged for ICP within these sales. It has an active exchange rate.
The SNS NF neuron then produces rewards, in most circumstances, if it is voting.
The NF neuron is disbursed, sold back to ICP, and returned in the form of maturity.
Hence it directly goes out of its way to evade taxable events by disguising them as “maturity”. If you were to do this on an individual level, there’s 2-4 taxable events depending on the jurisdiction.
I feel that all points of discussion regarding your proposal to remove the Neurons’ Fund have been thoroughly covered in this forum thread. I appreciate that you have now submitted a motion proposal, allowing the NNS to make an informed decision and allowing us to move forward.
As I have previously explained above in detail, I do not support your proposal. The Neurons’ Fund plays a crucial role in bootstrapping the SNS ecosystem and, by extension, significantly benefits the entire IC. Consequently, I anticipate that DFINITY will reject this proposal.
I agree that there are aspects of the Neurons’ Fund that can and should be improved. For instance, in response to concerns about proportional contribution, a concrete proposal has been put forth in this forum post a month ago. I intend to submit a motion proposal related to this issue shortly.
Given it’s liquid maturity, that could be spawned, and is actively being utilized within the Neuron Fund, is it an accurate assumption to assume that because the Neuron Fund ceases to exist, the participants also are no longer interested in “bootstrapping the ecosystem”?
Which Design Flaws discussed does DFINITY agree with?
Given they’re recognized as such (design flaws), is it not reasonable to prevent people from exploiting them while they are still in effect?
Proposing solutions is a step towards the right direction, but DFINITY has shown implementation typically takes much longer - inherently leaving these attack vectors to be abused.
I disagree with this claim. Your previous proposal was moderated because so many comments from the community were in significant violation of rules and guidelines on the forum. None of the content of you proposals or relevant community responses has ever been censored.
I don’t think I asked you to justify anything. Asking for clarification on details you offered is different in my opinion. Anyway, I’m glad you actually submitted this one to the NNS so we can get a final NNS decision on this overall topic. Whether it passes or fails as a proposal, I’m sure there are details of the NF that you have highlighted that will be improved in the future. Hence, the proposal should have a positive result either way.
Theres a difference between moderating comments & locking a thread. Moderators very selectively moderated comments, allowed escalation, instigation, and then locked the thread in the middle of a conversation, as shown below.
In regards to your comment about “actually proposing this one” - what’s the value in re-proposing something that has already passed? It just dignifies the claim that DFINITY can unilaterally void proposals.
We’re about to go off topic if I respond to this, so I’m just going to leave it alone and let you have the last word. Your NF proposal should stay focused on the NF topic, not rehash previous topics.
Agreed, so I’m just going to quote my response to @bjoernek in hopes I can further this dialogue, rather than it getting overlooked 
Kudos to you for putting in the work and creating an actual proposal. I haven’t read through the entire thing and done my research on what you’re looking to change, but I applaud your efforts!
Hey @Accumulating.icp, as you know I’m still pretty new to ICP and am trying to gain a better understanding of the ecosystem and how it functions. There are some things in this proposal that I just don’t understand and am hoping you, or anyone else, can clarify.
For the sake of this discussion, assume I am a small retail investor that has staked 100 ICP for 8 years and checked the “participate in neurons’ fund” checkbox.
So if I have participated in any of the prior SNS sales by voting in favor of it by solely checking the “participate in neurons’ fund” checkbox, if I want to sell my portion of that SNS, I have to do it through an NNS proposal? There is no other way?
In what way could someone take advantage of that information? I’m not seeing a way in which that information is useful for anyone trying to do something malicious.
Now I’m confused, because above that, you said “Neuron Fund participants have decided they’d like to sell their positions, they have to create a proposal, to the entirety of the NNS.” So, as a small investor under the circumstances I stated, can I just go to a DEX and sell what I got? Or do I have to create a proposal?
Is this based on the assumption the Neuron fund is going to just dump everything at once? I’m confused because, if I was a NF contributor, based on what I said above, I don’t get to keep my portion?
So far, this sounds like the Neuron Fund is just one huge entity that can go and dump its treasury of any token on any DEX it wants at will and decimate the liquidity pool. Is that really how it works? I’m honestly not sure if that’s the case because I don’t have enough experience with it. If that is the case, why would it do that? On top of killing the price, it would take a huge loss at the same time? I guess if the project it had invested in was in a death spiral?
I live in the U.S. and have for all of my life. I use cash. It can be used to directly evade taxable events. That doesn’t mean it is a bad tool. It just puts the burden of tax reporting on me. Just because the mechanism doesn’t take into account taxes (which it shouldn’t, in my opinion), doesn’t mean it’s a flaw.
It is my belief each individual is responsible for keeping track of their own taxable events and correctly reporting them to whatever agency oversees that in their specific country. In the U.S., if I sell someone something, I am supposed to collect taxes based on where I live because I am going to be expected to pay those taxes at the end of the year. I worked as a freelancer for a while, and I knew when someone paid me, I needed to set aside some of that money for taxes. If ICP moons, I am going to have to pay taxes on that. That’s my responsibility.
I am not a lawyer, or tax professional, but this sounds reasonable to me. And I would put the burden of paying for that taxable event on the person/company that received those rewards. If that’s me because I participated by having that box checked, then I need to handle it. Or hire a professional to handle it for me.
I think this is unfair. How many court cases are open against Dfinity in the U.S.? I have only come across one Civil case. Just because the SEC filed a court case against another entity and stated they believe ICP is a security doesn’t mean they have an open case against them. They may, or they may not. Can you send me a few of the cases so I can read through them? I actually like reading through legal proceedings because they often have very useful information.
Again, I think this is not an accurate statement unless Dfinity has been issued a Wells notice, or the SEC has filed an active case accusing ICP of being a security. I haven’t seen this yet, but if they have, please send me the cases as I’d like to check them out!
With that said, I think it’s sad that a company should have to base their documentation on the constantly fluctuating laws in the U.S. I don’t think that’s right. I would hope someone has read through their documentation and determined it was good enough to outline the opportunities along with the risk. I think the language is fine, but I’m also not going to cry to the SEC if my investment tanks. I know the risks.
Can you explain how this is the case a little better? I’m totally confused as to how the Neuron Fund works after a successful SNS swap now.
@borovan some people flagged your comment that said, “after your last mental conspiracy thread…” for being ad hominem.
You could make an argument the comment was meant at the thread, not the person, but it was too close to ad hominem, so i removed it. My simple test was: “how would this thread be if every other comment looked like this?” and i decided to honor the user-flags, remove the comment, and keep a cleaner thread.
No worries, I am happy to answer the questions you have within the scenario provided!
That is correct, but the NNS proposal does not signify that you individually want to sell - it signifies that the entirety of the Neuron Fund wants to sell.
The issue is that it groups the entirety of the “fund” under one umbrella - in which they make one collective decision on behalf of all involved.
Except it’s not the fund that makes the decision, it’s liquid democracy representatives of the NNS.
This scenario creates 2 issues,
Primarily, assume you’re an investor in an SNS, and you learn that the Neuron Fund would like to their allocation of the supppy (typically 10-20% of supply).
Knowing that will reduce the price of the token, you can take your tokens ahead of time, front run the proposal, sell off before the fund, and purchase after the fund is done selling, at a drastically discounted rate.
That event creates a scenario in which the selloff price for the fund is inaccurate, therefor the distributed maturity does not align with ICP received from sale.
No, you can not simply go to a DEX.
If your “contribution” is locked within the Neuron Fund, you need the Neuron Funds permission to dissolve & sell off these assets.
You do not hold the assets, the neuron fund holds them for you.
It is true that the Neuron Fund could compartmentalize into smaller transactions, but currently, the Neuron Fund identifies the entirety of the an SNS sale as a “grouping”. When a proposal is made to dissolve Neuron Fund SNS Neurons, it currently does not specify which neurons, but rather addresses the SNS as a conglomerate.
The individual does not directly control their assets.
The difference here is that when you go take cash out of your ATM, there is a trail that can be followed.
When maturity is withdrawn from neurons - there is no trail. When SNS rewards are compounded, spawned, sold - there is no trail.
While I agree that typically the responsibility would fall upon the individual - there literally is no way to track the countless taxable events evaded. You do not have access to most of the information required.
This again comes down to having the information to be able to provide to these professionals. This functionality, while it may be unintentionally, does not disclose the entirety of the information required.
Specifically, there’s no indication of maturity flow, exchange rates, staking rewards, etc., or their difference from ICP NNS Governance rewards.
While they may have not yet directly opened a case against ICP / DFINITY, they have proclaimed it is an unregistered security, and directly address it within filings. They are quite clearly building a case, if one is not already open.
Here are some references to cases against DFINITY in the USA - searching “DFINITY Lawsuit USA” got me these results;
Here is the link to the SEC case as well to familiarize yourself with how they address ICP;
Please refer to page 65 within the SEC case, where they begin to address ICP. They have directly stated they believe this is an unregistered security.
This ties back into a few of your first questions, but essentially, if you are a neuron fund participant - anything you want to do with your portion of the fund (in reality actions can only be made with the entirety of the fund), you need approval from the entirety of the NNS to do so.
Proposals to participate, disburse, and sell, all go through the NNS.
The gatekeeping aspect is the fact that 445m Voting Power is controlling 20m ICP worth of assets on behalf of others - rather than simply allowing people to manage their own assets.
Ok, “liquid democracy of representatives” is a little complicated for me. 
I’m thinking this means people who clicked the checkbox to participate? So everyone needs to vote yes in order to sell it all under one big umbrella?
How can I take my tokens ahead of time? I thought if I wanted to sell them, I couldn’t, they are all under one umbrella and it has to go through the NNS? I’m clearly not getting this concept. It sounds like you’re saying I’m forced to hold my portion unless a proposal is passed and everything is sold at once, but if I want to front run, I can just sell my portion ahead of time. It can’t be both, right? What am I missing?
You’re assuming I’m using a bank at all. If I charge someone $5000 to paint their house, and they pay me all in cash, that’s a taxable event. I, being the receiver of the cash, am supposed to report that as income when I file my taxes. Without a contract, the government will never know or can prove the transaction ever took place if I never deposit that cash in a bank. They cannot track that money if I keep it in cash. For me, this is not a reason to shut down the NF.
I still don’t see a problem with there being no trail. I’m responsible for tracking my transactions/gains/losses. If I have access to the money entering/leaving my wallet, I have access to the information required to report it. It may not be EASY to track, but I can definitely keep track of my own stuff if needed. If I don’t/can’t, again, that’s on me as a user. I’m not arguing this shouldn’t be a feature. I love being able easily access this info when I need to on other chains. But, I don’t think it’s a reason to shut down the fund.
These are all the same single class action lawsuit I mentioned. My understanding is they’re trying to argue it’s a security in Civil court. It’s still only one case.
To me, and to the courts in the U.S., it doesn’t matter what they believe. It matters what they can prove. Building a case is VERY different from filing a case.
I should have said that before. Yes, based on that filing, they obviously are looking at ICP as an unregistered security, but with all of the uncertainty in the U.S. crypto markets and debating in Congress, it doesn’t bother me at all.
So there is only one active Civil case from private parties against Dfinity in the U.S., that I know of.
Correct, and I’m still confused. Because if this is the case, in my mind, it’s impossible to front run.
I wanted to point out that “Smaug’s Neuron For Retail Investors” voted Yes in favor to remove the Neuron Fund.
For one the name is very misleading to retail investors and should be considered “false and misleading” and this neuron needs to be removed.
Removing the Community Fund would put many retail investors who want to swap their ICP for a project tokens in taxable situations, hurting the retail investor.
I think someone there should be a proposal to remove that Named Neuron until a more appropriate and non-misleading name can be brought forward.
It’s misleading and false advertising and I perceive it to hurt ICP retail investors.
From an investor opinion the name is Misleading and must be changed… you shouldn’t vote to put a retail investor into a taxable situation, when your name suggests your “for the retail investor”. If I were the SEC (whom is supposed to be looking out for retail’s interests) I might want to question the owner of that neuron to see if they really do represent the retail investor.
Edit: Sidebar: I love the SNS, why can’t other SNS project’s tokens that have launched (SNS1, CHAT, KINIC) be used for current SNS token swaps. Currently it’s only ICP that can be swapped for HOT (Hot or Not) tokens, why can’t I use other other SNS tokens. This would strengthen the community in my opinion - I’m not sure if this was brought up or discussed previously but I think this should happen in the future unless there is some technical factor that would prohibit it. “Live together, die alone”
No, “representatives of liquid democracy” refers to all named neurons - as they’re the decision making entities of the network.
While yes, people “can” vote individually, however with the grand majority of Voting Power this doesn’t happen - we utilize a followee system.
There is a difference between the SNS and the Neuron Fund. You can participate in SNS sales without participating in the Neuron Fund (as an individual).
They and anybody else with a token allocation, are the ones in a position to front-run.
How do you determine your average buy in, your staking rewards, your sell off point, the quantity of tokens you get, etc, if you do not have access to the information regarding the maturity utilization, the neuron, the staking rewards, etc? Then how do you seperate that event from governance rewards, and SNS payouts?
This should not be a “gotcha” moment for users - they should not have to write their maturity down on a pen&paper on a daily basis to track their “investment”. Let’s keep in mind people are saying the Neuron Fund needs to exist so that people can use a “set&forget” mindset.
Otherwise they would simply spawn their maturity, and participate in the sale manually.
This may be the case, I hadn’t looked to deeply into the cases, I had just noticed they were published by different firms, giving the impression they’re different filings.
(EDIT: Upon review, I do in fact see what you’re saying in which the majority of these cases are additions to the same class action.)
Regardless of this fact, DFINITY & ICP are still being scrutinized within the USA.
I certainly would not like to add tax evasion to their current list of “sins”.
Is it possible that “Smaug’s Neuron For Retail Investors” sees more harm in tax evasion…? Considering, it is, you know, a crime?
I’d say they’re representing their followees responsibly.
Why not propose to remove all who voted yes. That is the only true way 
Don’t tempt them😉
At least we’re getting closer to admitting the root of “what problem does the Neuron Fund Solve” - depending on the perspective you look at it from.
Ok, I think I’m understanding what you’re getting at here. Not 100% though. I’ll keep reading and see if I can clarify it more myself. Thanks for the info!
For tax reporting purposes, in short, my tax guy needs to know how much I made and how much I lost on crypto. Based on that, he determines how much I have to pay to the government. I believe I can do that with what is currently available. Of course, the proof will come when I have to file taxes next year! I agree with you more tools for tracking/etc would be a welcome addition to any project.
Yeah, every crypto chain is being scrutinized. Hopefully a regime change in the next year or two will change that and the U.S. can focus more on driving innovation.
Thanks again for all the info you gave and for helping clarify the details of the SNS and NNS!
I don’t believe following the rules is tax evasion. One might call this a loophole, for a comparative example my investment property in the USA sold for $20,000 more than I bought it for - do I have to pay taxes on it?…. Yes if I take that cash and put it in my wallet…. No if I take that cash and buy another investment property. (1031 Exchanges) It’s a similar situation to the Neuron Fund - smart people following the tax code.
The ones who win know the rules and know what’s allowed - the community fund isn’t tax evasion.
What is clear is a misrepresentation of voting interests by leading “…for the retail investor” into a taxable situation.
Maybe to you, following the rules is tax evasion
A mechanism was crafted in which people can take an asset that was received as staking income, exchange it for another asset, collect staking income on that asset, and then exchange back to the original asset, with the assumption of profit, without facing any taxable events - this is not equivalent to selling a house in a regulated market.
We’ll have to agree to disagree.