Hi Leo
Thankyou for providing the history and current situation regarding your and Enzo’s node provider entities and for the disclosure of the finance provided to you both by David Fisher.
While I understand the difficult situation in which you have found yourselves regarding node provider independence I want to focus on the solution that you, Enzo and David are proposing to remove the interdependencies between your node provider entities.
First, for clarity, let me summarise the current situation as I understand it (please let me know if I have anything wrong here):
- Blue Ant LLC, Zarety LLC and Rivonia Holdings LLC are all companies registered in Delaware (USA) and are each controlled respectively by Enzo, Leo and David.
- Blue Ant LLC, Zarety LLC and Rivonia Holdings LLC have been identified by Dfinity as a node provider cluster, based on the financing provided by David to Leo & Enzo.
- As an identified cluster, your three node provider entities would be limited to 42 node machines in total and therefore would require offloading 84 node machines to other independent node provider entities if there was no change to the current situation.
- David has wholly financed the purchase of 84 Gen1 node machines thereby enabling Leo and Enzo to submit their winning bids in DFINITY’s Gen1 node machine auction.
- The financing provided by David to Leo and Enzo was in the form of “unsecured loans” which would mean the loans were not secured by the node machine assets themselves; the nature of any loan security or repayment arrangement is otherwise unclear.
- Sisyphus AG is a corporation registered in Zurich jointly owned by Enzo, Leo and David; Enzo, Leo and David are listed as the only members of the Board of Directors.
Now to the proposed solution to the current clustering of the three node provider entities:
“BlueAnt LLC, owned by Enzo, will be sold to Sisyphus AG”
- this would make Blue Ant LLC a wholly owned subsidiary of Sisyphus AG.
- Enzo, Leo and David would then all be UBOs of Blue Ant LLC because they are members of the Board of Directors of Sisyphus AG, the parent company.
“Zarety LLC, owned by Léo, will be sold to David so he owns it outright”
- Zarety LLC would now be sold to David as a “going concern” with 42 node machines operational in the Isle of Man “Douglas 2” (im2) datacenter which are now being remunerated monthly by the NNS for a period of 24 months.
- as a going concern, the sale price of Zarety LLC would overcompensate David as repayment of his unsecured loan to Leo for the purchase of 42 node machines in the DFINITY auction.
“Rivonia Holdings LLC sells its 42 US-based nodes to a third-party”
- What is the imperative for David to sell all of the node machines he currently owns through Rivonia Holdings LLC?
- Is this only to enable David to purchase Zarety LLC and its 42 nodes outright?
- Is this preferred because of the additional ~35% in monthly remuneration received for the Zarety nodes located in Isle of Man compared to the Rivonia nodes located in the US?
- Who will operate and maintain the nodes machines in the Douglas (Isle of Man) datacenter for David who is based in the US?
The proposed solution does achieve the separation of Rivonia LLC from this node provider cluster by selling all of its node machines to a third party. However it does not separate Blue Ant LLC and Zarety LLC from the cluster; in fact it clearly compromises the independence of these two node providers further by linking Enzo, Leo and David more directly as co-owners and co-directors of Sisyphus AG; it also does not explicitly remove the original cause of the clustering which was the unsecured loans provided by David to Leo and Enzo.
Here is a simpler, more transparent solution which would actually lead directly to a financial separation of the three clustered node provider entities in the short term:
- Rivonia Holdings LLC does not sell its 42 US-based nodes to a third-party; David retains ownership and control over the 42 Gen1 nodes he is currently being remunerated for at the monthly rate as agreed for the 2 year extension of Gen1 node machine operations.
- Zarety LLC is sold as a going concern to another independent node provider entity (current or new) based on the full 24 month period it has just begun being remunerated for, at a sale price commensurate with the current operating net revenue margin; Leo pays David 50% of the sale price of Zarety LLC, reducing his unsecured loan to David by much more than half.
- Leo becomes a 50% owner of Blue Ant LLC paying Enzo the other 50% of the proceeds of selling Zarety LLC for his share; Enzo pays David this 50% of the sale price of Zarety LLC, reducing his unsecured loan to David by much more than half.
- Leo and Enzo repay the remaining portion of the unsecured loans from David over the course of, say, 12 months from the net revenue of Blue Ant LLC.
The final outcome of this alternate proposal for dissolving the cluster is that we would have three existing registered node provider entities with no financial relationship to each other (through loans or share equity), no shared UBOs and no operational interdependence.