Most people holding XRP will eventually learn about Mt. Gox and its creator Jed McCaleb. The Mt. Gox incident was probably the biggest crypto mishap in history so far and as such anything related to it will likely spark suspicion. That’s the story of Jed McCaleb, cofounder of the Stellar Development Foundation formerly known as Jed McCaleb’s Secret Bitcoin Project, and creator of Mt. Gox. While he probably didn’t have anything to do with it the shadow of Mt. Gox will follow him forever.
Given Jed’s connection to Mt. Gox and Ripple, many FUDsters and unscrupulous individuals are spreading rumors to stain Ripple and XRP’s reputation. Like the rumor that says Ripple is a scam coin because Jed McCaleb was in Ripple’s team, and that he’ll cause a disaster like allegedly did with Mt. Gox. Other rumors claim Jed and Ripple are waiting to dump their XRP once the price goes higher. Some claim Jed never really left Ripple, and that this is all a ploy by the banksters who want to control the world.
Let’s take our tinfoil hats off for a bit. Let’s clear these rumors once and for all.
The story of Ripple & Mt. Gox creator Jed McCaleb
Jed was part of the team that created Ripple Labs before it was even called Ripple. Back then Ripple was called OpenCoin. McCaleb was regarded as one of the best cryptographers at the time, founder of eDonkey2000 and described by most people who know him as ‘genius’ according to Michael Craig at the Observer. McCaleb helped create the Ripple protocol together with David Schwartz, Arthur Britto and Chris Larsen, to name a few people.
Even though McCaleb was the one to initially approach Larsen and the rest of the Ripple Labs members, it was actually Ryan Fugger who founded the original Ripple project in 2004. McCaleb’s genius wasn’t enough to build Opencoin Inc. as a sustainable business – not after Mt. Gox. Without Larsen’s experience in business, Schwartz’s brilliant mind, and Britto’s vision Ripple would not likely be what it is today.
Jed’s stay at Ripple ended soon after helping his girlfriend, Joyce Kim, secure an investment from Ripple Labs for her ecommerce startup SimpleHoney. Allegedly, Jed persuaded Larsen into giving up the money for the startup.
After onboarding Ripple, Jed’s girlfriend gave herself the title of Chief Engagement Officer – oddly close to Chief Executive Officer – which did not fly with the smarter peeps at Ripple. Kim had to be put in her place by Chris Larsen after insisting on things that clearly were not in her place to decide. According to Michael Craig for the Observer, the conversation between Chris and Kim went something like this:
”Joyce you’re a CEO. It’s going to be hard fitting in. You’re obviously reporting to me. Two cultures coming together is always a hard thing. Let’s talk about everything before we do it just to make sure everything is good.”
Kim also made constant attempts to turn the spotlight to Jed, going as far as starting rumors that McCaleb was Satoshi Nakamoto and placing CTO – Jed’s position at Ripple – as the top spot on Ripple’s website.
Not surprisingly her stay at the company did not last more than a couple of months. Joyce was kicked out of Ripple Labs in 2013. Despite her departure McCaleb continued to include Kim in company matters, eventually earning herself the nickname ‘Yoko Ono’ for her ever-present meddling at Ripple.
McCaleb sought to sell Ripple Labs to fintech company Stripe after his girlfriend’s departure. The deal was supposed to go down for 13 million dollars but it never happened for undisclosed reasons. At that point McCaleb and Larsen held almost 20% of all XRP – around 18 billion XRP total – and there were already talks about the sale of those tokens for the sake of the XRP ecosystem.
McCaleb tried to kick out Ripple co-founder Chris Larsen after the deal with Stripe didn’t pull through. With Kim at his side, Jed went to Arthur Britto and explained how Larsen was to be removed from Ripple without showing the least concern for the effect that would have on Larsen’s career. When prompted about Larsen, Jed suggested the company say that he was leaving for health reasons – a naive suggestion that didn’t play well with Britto who suffers from severe arthritis.
It was Jed who wanted Larsen gone and ironically nobody wanted Jed to leave. McCaleb’s dishonesty angered Britto enough to arrange a meeting with Roger Ver, Jesse Powell and other top level Ripple members, some of whom once sided with Jed. During the meeting the group voted to keep Larsen as the sole CEO of Opencoin, five to one. Jed, being a huge Jed fan himself, was the single voter in his favor.
In June 2013 McCaleb left Opencoin. He was almost out of the picture.
Gone from Ripple, still a hodler
Jed left Ripple holding a moderate bag containing 9 billion XRP, the amount he was awarded for co-founding Ripple Labs. Ripple was definitely not pleased as the sale of these tokens could harm the XRP ecosystem. In fact, Ripple prices dropped over 60% when McCaleb announced in a Ripple forum that he would be selling his XRP and donating some to charity. McCaleb wrote:
”I have given away and donated some of my 9 billion XRP to charities such as MIRI, Literacy Bridge, Give Directly, Mission Bit and others. I plan to start selling all of my remaining XRP beginning in two weeks. Because I have immense respect for the community members and want to be transparent, I’m publicly announcing this before I start. So just fyi…. xrp sales incoming.”
Meanwhile, Arthur Britto at Ripple assured users they were working on a solution and denied Jed would dump his XRP.
In 2014, Ripple struck a deal with Jed to control the sale of his tokens for the next seven years. It was around this time that Jed created Stellar, a fork of Ripple. “The purpose of the agreement was to ensure distribution of his XRP in a way that would be constructive for the Ripple ecosystem,” details a post by user monicalong on the Ripple forums. Every day Jed would be allowed to sell a small percentage of XRP’s daily trade volume.
Jed allegedly broke the terms of the deal and was involved in a legal dispute with Ripple for a while. Bitstamp froze 100 million XRP that family members of Jed allegedly tried to sell circumventing the deal with Ripple.
Ripple conceded to end the dispute and to change the terms of the deal if Jed sold all his equity in Ripple, the company. McCaleb wrote a post titled ”My Settlement Victory” where he details his victory against the bad boys at Ripple. I wonder why he didn’t write a post when he was voted out of Ripple for wanting to kick out his fellow cofounder.
The new terms of the deal allow Jed to donate 2 billion XRP to a charity of his choice. Jed and the charity would also not be able to sell more than .5% of the daily volume for every day of the week. The second and third year the percentage would increase to .75%, 1% for the fourth year and 1.5% onward. Jed and his children owned a remaining 5.3 billion XRP at the time of the settlement.
Ripple would in turn release the disputed 100 million XRP that remained locked with the US District Court for the Northern District of California, and these funds would be given to Stellar.
Ripple’s SVP of marketing at Ripple, Monica Long, wrote in a post on the Ripple Forum:
”We at Ripple are pleased with the outcome of this agreement. It provides predictability and clarity about distribution of the largest individual holding of XRP in a way that fosters good health and growth in the Ripple ecosystem.”
Featured image by Marco Verch – CC by 2.0
Editor’s note: This article was written using multiple sources but has been more heavily informed by Michael Craig’s post on the Observer titled The Race to Replace Bitcoin posted on February 5th 2015.
Crypto enthusiast, writer and editor.