Who Is Daniele Sestagalli? – Crypto Briefing

Last week, it emerged that Daniele Sestagalli, founder of several popular DeFi protocols and de facto leader of the “Frog Nation,” had been aware that the treasury manager of his Wonderland Money project had patchy—indeed, criminal—history. On close inspection, it would seem that a number of Sestagalli associates have had their share of run-ins with authorities.

An Admission

On Jan. 27, on-chain analyst and self-proclaimed detective operating under the pseudonym zachxbt made a scandalous revelation on Twitter. In a series of screenshots that purport to show private messages between zachxbt and Daniele Sestagalli—the founder or key public figure behind such DeFi phenomena as Abracadabra Money, Popsicle Finance, and the now deeply-beset Wonderland Money—in which Sestagalli appears to make stunning admission.

“I came across something rather odd about that,” writes zachbxt in the screenshot.

The response, purportedly from Sestagalli, came back: “About dubai?” they write.

“About Sifu,” zachbxt replied, referring to Wonderland’s treasury manager. 

“Oh sheet,” Sestagalli appears to reply, “What’s up[?]”

“Well,” writes zachbxt, “he’s the Quadriga guy.”

“Sestagalli” responds: “I cannot confirm,” he writes, before continuing, “But I have thought about this a lot.”

Fast forward to a second screenshot, and the figure zachbxt claims to be Sestagalli seems to all but confirm the suspicion: “yea is a problem in the PR…” they write; “Alex my partner told me.”

Thus it was revealed to the world that the true identity of Wonderland’s pseudonymous treasury manager 0xSifu was in fact Michael Patryn, a serial scammer, former convict, and co-founder of collapsed Canadian cryptocurrency exchange QuadrigaCX. 

Fallout

The revelation shook Wonderland’s otherwise upbeat and vibrant community to its core. 

QuadrigaCX made global headlines in late 2018 when its CEO Gerald Cotten allegedly died during a trip in India, leaving roughly $169 million belonging to 115,000 customer cold wallets inaccessible. 

Following the incident, the firm’s co-founder Michael Patryn was identified as Omar Dhanani, a serial criminal who spent 18 months in U.S. federal prison on conspiracy to commit credit-and-bank card fraud in 2005, and burglary, grand larceny, and computer fraud in 2007.

To hide his criminal past, Dhanani changed his name twice; once from Omar Dhanani to Omar Patryn in 2003, and then from Omar Patryn to Michael Patryn in 2008. Following QuadrigaCX’s collapse, Patryn briefly vanished from the crypto scene—only to now make a grand reappearance as 0xSifu, the anonymous manager of Wonderland’s $700 million treasury.

Following the disclosure, Sestagalli published a statement confirming the allegations. “To summarize what has happened,” he wrote, “word came out that Sifu who has been running the Wonderland Treasury, previously was a co-founder of QuadrigaCX, and has had other occurrences in the past.”

Instead of immediately distancing himself from Patryn, Sestagalli admitted that he had known about his real identity for about a month and deliberately decided against ending the relationship. “I found out about this 1 month ago,” Sestagalli admitted, adding, “I am of the opinion of giving second chances, as I have mentioned on Twitter.” 

1/ Today allegations about our team member @0xSifu will circulate. I want everyone to know that I was aware of this and decided that the past of an individual doesn’t determine their future. I choose to value the time we spent together without knowing his past more than anything.

— Daniele never asks to DM (@danielesesta) January 27, 2022

Judging by the comments under Sestagalli’s initial Twitter thread, this course of action didn’t fare well with the Wonderland community. The news came amid an ongoing PR crisis for the project, whose native rebase token, TIME, was already trading at record lows and below its supposed backing price.

To make things worse, an old interview from December 2020 in which Sestagalli briefly discusses the Quadriga incident resurfaced and started circulating on Twitter. In it, Sestagalli jokingly says: “The Quadriga story will come back guys, I’m telling you. Sooner or later, something will reappear on Quadriga.”

Despite this statement likely being nothing but an unfortunate choice of words and pure coincidence regarding the recent developments, it was enough to trigger an avalanche of rumors and conspiracy theories concerning Sestagali’s true intention. 

The TerraBitcoin Club

On the same day that zachxbt revealed 0xSifu’s true identity, Italian investigative journalist Nicola Borzi wrote a Twitter thread and shared several screenshots of what appears to be a discussion concerning the $25 million Popsicle Finance hack from Aug. 4, 2021.

1 – On the night of August 4th 2021 #Popsicle platform said it had been “hacked”. On that occasion, on a secret Telegram chat, #TerraBitcoin, who hids a group of crypto investors, mostly Italians, managed by Paolo #Barrai, there was a dialogue among the investors

— Nicola Borzi (@nicolaborzi) January 27, 2022

According to Borzi, the screenshots originate from a private Telegram channel belonging to an exclusive club for mostly Italian crypto investors called TerraBitcoin, managed by Paolo Barrai, a man with seemingly deep connections inside the Italian crypto community.

The screenshots show a member using the alias “Merlin” saying:

“Bitfinex was hacked on Aug. 2, 2016. It seemed like the end of the world, but thanks to the hack we became stronger because many intelligent people helped us and became our partners. Paolo was one of them. I met Daniele one year ago, Paolo introduced us. Daniele has great talents, the courage of a lion, and a big heart, I’m sure he will manage to come out of this brutal moment even stronger.”

Clarifying to the group exactly who the person behind the Merlin username was, Barrai is seen saying: “for those who didn’t get it we have with us the friend Giancarlo Devasini.” For the uninitiated, Giancarlo Devasini is the CFO of Bitfinex, once the largest cryptocurrency exchange in the world and currently the issuer of the largest stablecoin on the market, Tether.

Devasini has long been known to adopt the alias “Merlin” or “Merlin the Wizard” in many of his communications—they also serve as his Skype and Telegram handles. Coincidentally, one of Sestagalli’s DeFi projects, Abracadabra Money, makes repeated references to the same mythological wizard throughout their Medium posts and technical documents. The project’s core Twitter account, which is supposedly operated jointly by the project’s development team—is dubbed 0xMerlin.eth.

To make things even more interesting, on December 8, an infamous Tether and Bitfinex critic going under the username Bitfinex’ed on Twitter shared screenshots that appear to be from the same chat in TerraBitcoin’s Telegram group. There, Devasini is allegedly seen revealing plans for launching a hybrid stablecoin designed to avoid the risks of holding large sums of USD by the end of the year. 

Coincidentally, Sestagalli’s Abracadabra Money project is a more decentralized alternative to Tether, or a lending platform that uses interest-bearing tokens as collateral to mint USD-pegged stablecoins named Magic Internet Money. Bitfinex was also the first centralized cryptocurrency exchange to list MIM as a base currency. 

Bitfinex’s lack of transparency and legal troubles are no secret. Only last year, the holding company of Bitfinex and Tether, iFinex, reached a settlement agreement with New York Attorney General Letitia James in which the company was forced to cease operations in New York on the grounds that it had deceived clients by overstating reserves and hiding approximately $850 million in losses.

(Interestingly enough, both QuadrigaCX and Bitfinex used Crypto Capital Corp for their payment processing. Now defunct, Crypto Capital was a shadow bank for crypto companies run by Ivan Manuel Molina Lee. The Polish authorities arrested Lee on accusations of money laundering and involvement with an international drug cartel in 2019.)

Paulo Barrai, the financial advisor who allegedly introduced Sestagalli to Devasini, also coincidentally appears to have had troubles with the law. In 2013, he was fined €70,000 by the Italian securities regulator Consob for breaking investment disclosure obligations. 

The network expands from there. Being the founder of TerraBitocoin, the “private and confidential club for free people and investors,” Barrai is also in the business of organizing crypto-focused conferences. In 2019, he organized a crypto conference in Lugano with seven speakers, one of them being Zhao Dong, founder of Chinese crypto exchange Renrenbit and a large shareholder in Bitfinex who, in March last year, pleaded guilty to laundering $480 million for online casinos using cryptocurrency. 

Another one of the speakers was Lars Schlichting, CEO of Poseidon Group, a holding company controlling Eidoo, a crypto startup founded by Natale Ferrara. Ferrara, in turn, is a co-founder of the crypto investment company Blockchain Invest with Paolo Barrai.

Barrai’s Blockchain Invest, coincidentally again, is one of the companies that had invested in Zulu Republic, a failed crypto startup co-founded by Sestagalli back in 2016. Having allegedly known Sestagalli for a while, Barrai also invited him to speak as an expert on decentralized finance at his 2021 conference in Dubai.

The Camponovo Connection

Daniele Alekos Aldo Sestagalli first showed up in the crypto industry around early 2018 with his Zulu Republic blockchain project. Before becoming Zulu Republic, the firm was called Zulu Mobility Technologies, headquartered in Serafino Balestra 6 in Chiasso, Canton Ticino, Switzerland.

According to the Swiss Central Business Registry, Zulu Mobility Technologies was co-founded by Sestagalli, Oliver Camponovo, and Ibex Capital—an accounting firm then owned by Camponovo. The firm was building a mobile application that was supposed to revolutionize the taxi service in Switzerland, comparable to Uber.

According to a 2017 interview, Sestagalli met and partnered with Camponovo because he was an expert in taxation and venture capital. “I met Stefano Barone [another co-founder of Zulu], an example of a successful entrepreneur capable of carrying out projects to the end, and Oliver, an expert in the world of taxation and venture capital. So we started,” Sestagalli told the LiberaTV newspaper.

Coincidentally, around the same time, in 2017, Camponovo was convicted in the first instance and sentenced to three years in prison for money laundering, falsification of documents, and violations of the law on foreigners: deceiving the authorities in obtaining residence permits. He was convicted along with Giulio Martino, a high-ranking member of Italy’s most notorious crime family, the ‘Ndrangheta, and the financial broker Franco Longo, dubbed the “mafia’s banker,” and sentenced to five and a half years. 

On Jan. 13, 2022, five years after first being convicted, Camponovo was acquitted on the money laundering charges by Italy’s Court of Appeals. The case has been returned to the Criminal Court of the first instance so that Camponovo can be tried again, but only for minor offenses.

According to the federal prosecutor in charge of the case, Camponovo was “the director of the criminal action, which he himself had conceived and implemented, making all his knowledge, knowledge and contacts with Swiss and international banks available to the criminal association.”

As part of the “Renewal” operation, the Swiss authorities confiscated various properties, including an office building on the street Via Giuseppe Motta 10 in Chiasso, owned by Martino (50%), Long0 (40%), and Camponovo (10%). Coincidentally, several crypto firms had their headquarters in the same building, including Natale Ferrara’s Eidoo, Poseidon Group portfolio company Digital Identity, and Cryptolab AG, which owns Paolo Barrai’s crypto consultancy firm BigBit. Camponovo’s company Ibex Capital was also registered in the same building. 

Interestingly, Zulu Republic isn’t the only firm that connects Sestagalli to Camponovo. According to Business Monitor data, Sestagalli is currently a decision-maker in three companies: Zulu Republic, DAAS, and DZent & Partner. Before moving from Via Serafino Balestra 6 in Chiasso (the same address where Zulu was registered) to Zug, DAAS made Camponovo’s company Ibex Services SA its “care of” postal recipient. 

DZent & Partner, on the other hand, is a firm that has Zulu Republic listed as a partner, Sestagalli as a CEO, and Anatol Lüthi as a Partner and Manager. Coincidentally again, Anatol Lüthi was a former CFO of Zulu Republic, one of the founding board members of Utopia Genesis Foundation, and sits on the board of directors on Ibex Services SA.

Utopia Genesis is a Switzerland-based company working to create a blockchain framework for the music industry. In 2021, Daniele Sestagalli became Utopia’s Chief Strategy Officer after leaving the failed Zulu Republic project. This was, in fact, Sestagalli’s last more “traditional” entrepreneurial endeavor before founding several relatively large protocols in decentralized finance.

The Company You Keep

Daniele Sestagalli built a name for himself in the decentralized finance space by, among other things, propelling a populist, anti-centralization, and anti-venture capital narrative. The Frog Nation’s whole shtick is building DeFi that is anti-VC and “anti suits.” But judging by his past actions, Sestagalli adopted that narrative only recently. He apparently had no problem wearing a suit only a few years ago while still being Zulu Republic’s CEO.

Furthermore, Sestagalli’s determination to entrust a convicted serial criminal with managing a $700 million treasury—even after finding out his real identity—raised many eyebrows within the community. On Sunday, he called for Wonderland to wind down due to divisions in the community, despite 55% of the TIME token holders voting against it.

Regardless of what happens to Wonderland, Sestagalli’s reputation has taken a serious hit. His past affiliations with individuals either alleged to have committed or convicted of financial crimes certainly won’t help salvage it.

Disclosure: At the time of writing, the author of this feature held ETH and several other cryptocurrencies.