Justin Blau, better known as DJ 3LAU, sparked a series of conversations this past weekend after announcing his exit from the friend.tech social currency platform.
The September 15 X thread revealed that he considered friend.tech to be “too risky” for him, indicating the presence of a number of regulatory concerns that he feels could present a risk to his public branding.
Friend.tech, launched in mid-August, offers users the ability to tokenize their social presence by buying and selling keys.
Since these keys have a financial impact, as they involve monetary transactions and can fluctuate in value based on various factors, Blau’s sudden departure is an early testament to wanting to avoid any future instances where crypto-based celebrity endorsements backfire, as we’ve already seen over the past few years.
“Because people will ask…Just off-boarded friend.tech after understanding more of the risks. I think it’s an awesome product, but a bit too risky for me (unfortunately),” Blau tweeted.
He continued “I take full responsibility on not understanding the full spectrum of risk that comes with (frankly) any new crypto product, before using it.”
Blau, who considers himself a DJ-turned tech entrepreneur, is also founder of the music rights NFT marketplace Royal, which launched in 2021. The marketplace enables music artists to “sell” their music royalties to fans as NFTs.
In a previous interview with Hypebeast, Blau spoke of his decision to go “full-time” into music tech, while emphasizing that he will still make music as DJ 3LAU on weekends and for friends on special occasions.
Blau: “Everything is probably fine minus the amm mechanic”
Blau’s main apprehension with friend.tech centered around the platform’s automated market maker (AMM), a feature that facilitates the trading of user keys, formerly known as shares, on friend.tech.
AMMs are a mechanism that makes it easier for individual traders to buy and sell crypto assets. As the underlying protocol that powers all decentralized exchanges (DEXs), AMMs help users exchange crypto by connecting the parties directly, rather than using an intermediary.
He voiced concerns that this feature, in the context of a social media platform, falls into a regulatory gray area that could potentially pose future issues for users.
The decision by the Royal founder to exit the platform naturally triggered a significant reaction on X (formerly Twitter), with the hashtag #3LAU, generating numerous tweets from individuals expressing support or criticism.
Some even accused him of unloading his shares on his followers or using them for “exit liquidity.” However, he later affirmed his commitment to reimburse anyone who had purchased his keys.
Blau also clarified that he did not perceive the risks as exceptionally high but felt a sense of responsibility to avoid engagement in areas with unclear regulatory boundaries. He specifically mentioned concerns regarding the AMM mechanic and its association with his brand.
In a subsequent post, Blau addressed the concerns posed by X users, and elaborated on how he planned to compensate affected key holders. He mentioned the existence of “too much drama” surrounding his initial announcement and revealed his intention to create a split contract to return all the ETH to 3LAU Friend.tech key holders pro-rata at the block at which he sold the first key.
He reaffirmed his commitment to donating the full value of all his keys (approx. 8 ETH) to a music-specific charity that he’s passionate about, the Paid In Full Foundation.
Friend.tech has been under the microscope as of late, with concerns that its “overnight success” was simply another fad, with X users declaring the platform to be “dead.”
However, last week, an anonymous user to friend.tech told CoinTelegraph that the platform’s future depends on the team and what they do over the next five or so months, with the platform experiencing an increase in its daily trading volume ($12.3 million per Dune Analytics).
As of September 18, friend.tech’s key volume reportedly took a sharp turn, yielding close to 2x as much volume as ETH NFTs for six consecutive days.
Who is Behind Friend.Tech?
Back in August, an X user who goes by the handle @nix.eth, was sharing some of their research into who the team behind friend.tech could be, cautioning users to “be careful putting too much money into it.”
According to the August 20 X thread, @nix.eth stated their belief that the same team behind friend.tech, also launched @KosettoIsKawaii at the end of 2022, alleging that this same team sold a bunch of wearable NFT stickers by having users spamming out referral codes.
That same day, the thread continued with additional support from @nix.eth claiming that the following people probably comprise the friend.tech team:
The thread continues to point out that “the most compelling evidence” behind identifying the friend.tech team is the “reuse of the Kosetto[.com] domain for the FT APL.”
Stoner Cats and the SEC
Just last week, the U.S. Securities and Exchange Commission (SEC) charged the Stoner Cats NFT project with having offered an unregistered security.
The NFT collection, which launched in July 2021, was spearheaded by Mila Kunis’ Orchard Farm Productions, expecting to release an animated series that features the voices of Nila Kuns, Ashton Kutcher, Chris Rock, and Ethereum’s Vitalik Buterin.
According to the SEC, the Stoner Cats NFTs were marketed and sold as investment opportunities, rather than mere collectibles – pointing to Stoner Cats 2 LLC’s marketing campaign. The creators agreed to pay a $1 million civil fine, among other things.
In March, the SEC also charged eight celebrities, including Lindsay Lohan, Jake Paul, and Ne-Yo, with violating the anti-touting provision of the Securities Act.
“Regardless of whether your offering involves beavers, chinchillas or animal-based NFTs, under the federal securities laws, it’s the economic reality of the offering – not the labels you put on it or the underlying objects – that determines what’s an investment contract and, therefore, a security.”
Editor’s note: This article was written by an nft now staff member in collaboration with OpenAI’s GPT-3.5.
This post was UPDATED as of 9/19/23 to include more information as to concerns involving the identity of friend.tech’s founders.
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