In January 2022, the NFT community was taken by storm with the launch of the Azuki collection: a series of avatars with a distinct look that’s equal parts The World Ends With You and Thrasher. In the months since its launch, it has built up enough momentum to threaten the Bored Ape Yacht Club’s position atop the NFT food chain — at least, according to some ranking metrics.
However, all that momentum came in very real danger of coming to a halt when Zagabond, Azuki’s creator, published a blog post discussing how his last three projects before Azuki came to an end. Ultimately, all of the projects he mentioned were abandoned by their original founding team.
The announcement was met with a lot of backlash in the NFT community. After the post went live on Monday, May 9, the price of an Azuki on OpenSea dropped from 19 ETH (around $44,600) to 10.2 ETH (around $23,000) at the time of writing.
Understandably, several members of the NFT community felt slighted by what was written in the post, alleging that with some of Zagabond’s previous projects — Tendies, CryptoZunks, and CryptoPhunks — he was guilty of committing the biggest faux pas in the community: the rug pull.
A rug pull is a malicious act in which crypto developers lure in early investors and then abandon the project by either (1) taking off with the project funds or (2) selling off their pre-mined holdings, with the intention of draining all funds from investors.
And the accusations don’t stop there. An individual going by the pseudonym hunk pointed to on-chain data that seemed to show the CryptoPhunks creator executing an NFT “wash trade.” When it comes to NFTs, a wash trade occurs when someone simultaneously buys and sells an NFT to artificially inflate its price. It’s illegal in traditional markets. The alleged CryptoPhunks wash trade resulted in a profit of 300 Ethereum. Then, the project ended.
So, why did Zagabond decide to reveal all of this now? Was he really only trying to share his learnings and just didn’t consider that some might read his previous “failures” as rug pulls? We can’t be sure. Many in the NFT community believe that the information was going to be made public in the coming days by way of on-chain sleuthing. However, these allegations can’t be verified. As such, it makes more sense to focus on the things that can be commented on: were these just failed projects or rug pull scams?
Let’s dive into what each side is saying.
Failed project or rug pull?
Zagabond framed the previous endeavors as “failed projects” and learning experiences that led to the eventual success of the Azuki collection and community. “Even though NFTs have entered the mainstream, it’s easy to forget how nascent the NFT space is. During these formative times, it’s important that the community encourages creators to innovate and experiment. Additionally, each experiment comes with key learnings….Azuki is built on learnings from CryptoPhunks and other projects, which taught me to lead, not follow,” he wrote in his blog post.
However, some members of the previous project’s dev team shared a very different experience. They didn’t see the projects as failures but clear scams. In a Twitter thread, a former CryptoZunks team lead accused Zagabond of being dishonest about his work, failing to properly communicate what was happening with the project, and abandoning the project despite having more events and content lined up in its roadmap.
Zagabond denied the accusations, saying that not enough people bought into the projects, and that’s why they failed. “Do I wish they were more successful? Of course. There was no product-market fit at the end of the day, but that doesn’t mean it’s a rug,” he said.
Zagabond took to a Twitter space on May 10 hosted by NFT community figure Andrew Wang to further respond to the allegations. He defended himself in a number of different ways during the space. First, he claimed that he handed off some of the projects to the owners of the collection. Second, he justified his actions by noting that there is no set rulebook for creators to go by. In short, he claimed that it’s difficult to know what to do. “When [there are] misaligned expectations, then the community feels like it’s still the core team […] promising these things that we should adhere to and commit to. But on the creator side, […] it’s [messier] and there isn’t a clear sort of cut-off line in terms of [the project] winding down,” he said.
Finally, Zagabond verbally committed to working on improving his communication and promised to speak with the community members of his failed projects to find solutions everyone is happy with. The creator stated that he would “like to dig into these specific situations with the community members going forward in the next few weeks to make sure that we manage these expectations and […] try to figure out what happens.”
Managing these expectations can be next to impossible without the proper channels for communication, though.
In Zagabond’s case, the creator shut down social media profiles and Discord servers for Tendies. And how can a creator manage community expectations if they just disappear and absolutely no communications channels exist? Members of the NFT community had these exact same questions. An NFT enthusiast known as 2070 accused the Azuki founder of “rugging” the project through these actions, claiming that the project ceased all activity very shortly after launch. Zagabond responded by claiming that keeping those platforms active “just gives people the sense that, […] we’re still going to be doing more things, which we weren’t.”
Much of the debate during the space played out the same way: members of the community raised issues, and then Zagabond justified his actions.
Many members of the NFT community were unsatisfied with how Zagabond handled the various allegations. To begin with, many felt that he should have at least apologized to those who lost money. Others felt that, given the staggering success of Azuki, Zagabond should try and compensate those who lost money on his previous projects.
Ultimately, Zagabond left the space unannounced partially through the discussion. It remains to be seen if the Azuki project will be able to sustain its momentum, or if it will end up as another flash-in-the-pan in the early stages of NFTs.