The comedy club NFT debacle teaches a lesson in transparency
In Venezuela, humor plays an important role, either as a form of protest or a way of understanding reality.
In November 2021, humor and non-fungible tokens (NFTs) were combined with the launch of the Comedy Monsters Club (CMC) project. The project was led by Roberto Cardoso, better known by his former stage name “Bobby Comedia”, and was founded with the brothers José David Roa and David Roa.
The project was advertised as the only comedy club to use NFT collectibles as membership. However, the hype would quickly turn to confusion for the project’s investors.
An enticing tale
Comedy Monsters reached the NFT-curious Latin American audience through the famous Venezuelan comedians.
Cardoso and his co-founders appeared in publications such as Forbes Mexico and on popular shows and comedy podcasts such as Nos Reiremos de Esto and Escuela de Nada.
Listening to an episode of Escuela de Nada titled “How To Make Money With NFTs”, the pseudonymous NFT collector came to Nairobi first to learn about the presumptive comedy club. Later they would decide to join the CMC community and purchase an NFT themselves.
“It’s in that conversation where you can really identify the project’s sales narrative,” Nairobi explained.
During the episode, the hosts interview Comedy Monsters co-founder José David, a self-proclaimed “NFT expert.” In the conversation, José David uses his own example of being an early investor in the Bored Ape Yacht Club, and reportedly made over $300,000 selling one of his NFTs.
His rags-to-riches story is followed by the “do your own research” mantra, often used to suggest that past statements by so-called experts should not be taken as financial advice.
“For someone new to the NFT ecosystem, this can lead to false expectations,” Nairobi said.
CMC officially launched in November 2021 with a supply of 10,100 NFTs. The starting price for each was 0.1 Ether (ETH), worth between $400 and $500 at the time of sale. The monsters would not be revealed to their owners until all the NFTs were sold.
Cardoso told Cointelegraph that the comedy club’s purpose was “to deliver as many experiential, material and financial benefits” to its members as possible.
However, beyond the novelty of the project’s proposal, it was never clear how CMC would maintain or increase the value of the NFTs. In a small section of the website consisting of only three sentences, the creators explain the tokenomics behind the project.
“The rarer that [the NFT] is, the better benefits it will possibly have and the greater value it will certainly have,” it says.
Community “failure”
The period after the initial launch of an NFT collection can be decisive in determining the project’s success. The value of tokens will depend on the public’s continued interest in investing, putting projects under pressure to implement successful marketing strategies.
The CMC founders were so concerned about the sale of their Monster NFTs that former members reported that the project’s creators pressured the community to help come up with sales strategies to sell them.
“We were practically asked to come up with marketing strategies. There was also the purported raffle of a Mutant Ape NFT in the community, on the condition that the Comedy Monsters Club sold out in just 15 days,” Nairobi recalled.
The pressure on society was piled on top of another key point: A flawed implementation of the club’s road map.
The CMC roadmap had five stages: production of a podcast, a comedy festival exclusive to holders, games and prize raffles in ETH, a foundation and a branch in the US.
Despite social media posts presentation 2022, as a successful year for CMC, the community shared a completely different experience. The project launched a podcast, but stopped after less than 20 episodes. The CMC founders organized events, but they were not exclusive and there were limited tickets for NFT holders. Even the raffles ended up switching from ETH prizes to giving out CMC NFTs instead.
The project never reached the goal of being completely sold out. According to its smart contract, there are 2,320 holders, who own 7,660 monsters in total.
Cardoso said a significant but unspecified number of NFTs were used in publicity stunts and giveaways, and he blamed the 2022 crypto market crash for the project not selling out.
A rough approximation of the comedy club’s earnings shows that it could have earned as much as $2 million to $3 million, based on estimates of the value of the tokens sold at the time of CMC’s launch.
Today, the CMC smart contract shows a balance of 0 ETH, and there is just over $300 in ETH left in the project’s main wallet.
A “soft blanket cover”
The community never knew for sure how the funds were spent on the project’s roadmap or how much was taken by Cardozo and the Roa brothers, arguing for a possible soft cover.
Suspicion about the project’s credibility arose in early March 2022 when the owners began to complain about the founders’ neglect of the community.
According to testimony from several former CMC owners, concerns began when David, the project’s designated CEO, left the Discord group, followed by his brother, José David. Society too reported that CMC holders asking questions on Telegram chats were blocked.
Cardoso told Cointelegraph that he actually signed a separation agreement with his former co-founders on November 9, 2022, leaving him at the helm of the project as founder and CEO. Specific details of this deal remained private.
In November, CMC holders and community members also noted a lack of transparency around the use of funds.
A pseudonymous CMC holder, RAMXx, continued to traces the project’s funds on the blockchain. The public record revealed that 411.9 ETH – valued at over $1.18 million using ETH’s average price between November 2021 and June 2022 – had been withdrawn from the project and exchanged using various cryptocurrency exchanges.
Venezuelan Twitter user Victor Noguera also shared more information by showing his process tracking all on the blockchain.
His research also found that the money had been split between three wallets. The contract shows that two wallets received a 25% share each while a third received 50%, which the community assumed was controlled by the Roa brothers and Cardoso respectively.
Cardoso confirmed the wallet amounts to Cointelegraph: “All the proceeds from the minting were divided into three wallets. Logically, my former co-founders and I had access to these wallets to run the club.”
With these findings, the community confirmed that the project lacked a community wallet, an instrument commonly used in Web3 communities to allow holders to keep track of invested funds and serve as a treasury for a project’s roadmap.
The lack of a community wallet came as a shock to some CMC NFT holders, whose investment floor is now just 0.015 ETH, or less than $30.
Cardoso confirmed the community’s findings to Cointelegraph, stating that Monster NFTs were solely “a membership for a club that includes a roadmap of benefits.”
“The resources or funds belong to those selling the token, not to the community. It is not a social contract that says the funds belong to the community or a ‘community’ wallet,” he explained.
The conversation about the irregularities of the CMC reached social media by December 2022. A community moderator, Alfonzo González, recalled on a Twitter Space that the founders improvised a lot, which combined with a remarkable lack of transparency and unsustainable strategies to keep up with the roadmap.
The gray area of NFTs
In today’s NFT industry, legal protection for users remains unclear. Since the Web3 space relies heavily on communities to make their own rules, users often get involved in projects with a lot of promise but little commitment to participants.
This can be seen in the formulation of objectives and the clarification of deadlines – or lack thereof – in project roadmaps. If the founders do not provide accountability measures in case they fail to meet the project’s goals and the participants or holders do not demand them, it can lead to losses to society if the project fails.
The only visible promise the Comedy Monsters creators made to their community was a rough road map. The project lacked deadlines and concrete consequences if it failed to achieve its goals. The entire project was based on the utility of the NFTs – and provided real benefits, including international comedy events and other experiences, such as workshops.
According to Maria Londoño, lawyer and co-founder of the NFT project Disrupt3rs, this ambiguity is what led to serious miscommunication between the founders and the community.
“They made very vague promises and there were attempts to strengthen them. However, there are neither specified committed parties nor deadlines for the promises. There is no contractual obligation that can be claimed,” she told Cointelegraph.
“Saying things like ‘This will probably go up in value’ may sound like a promise or return on investment through speculation, but it could also be pure ignorance,” Londoño added.
After the storm on social media, the Comedy Monsters Club continues to be active, offering events and workshops to its patrons.
Cardoso said the project would continue despite the damage to the club’s image. “Part of it is learning and improving,” he said.
Londoño also believes that the creators of the Comedy Monsters Club ultimately underestimated the importance of creating explicit rules and expectations for themselves and their patrons:
“I believe that both parties (creators and community) were wrong by not setting and demanding clear rules. The community lost money and the creators their reputation. It’s a lose-lose situation due to a lack of understanding that the rules in the traditional world still apply in Web3.”
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