The CEO of Composable Finance has vigorously refuted allegations of legal improprieties at his decentralized finance (DeFi) infrastructure platform, which was being aired by the firm’s former CTO Karel Kubat.
In a Feb. 20 Twitter post, Composable Finance’s now-former CTO Karel Kubat announced he had stepped down from the firm. He also leveled a number of accusations aimed at his former company and its CEO.
In Kubat’s post, the CTO said that he is resigning because the firm has not provided financial statements to him or the community and because he has no overview of the company’s financial health.
He however said he suspects CEO Omar Zaki, who has been legally barred from raising money for companies, was involved in the raising of Series A funds for the company in violation of a cease-and-desist mandate from the U.S. Securities and Exchange Commission.
Kubat said he also suspects Zaki’s role in the alleged rug-pull project, Bribe, was “much greater than he publicly stated.”
Responding to Kubat’s resignation, Zaki took to Twitter Spaces for an AMA (Ask Me Anything) on Feb. 20, in which he vigorously denied all of the accusations. He claimed that all of the company’s actions to his knowledge were done in full accordance with the law.
1/ We’re sorry to announce that Composable Finance has parted ways with our former CTO.
While this naturally prompts questions and concerns, our team is committed to addressing these questions and alleviating any concerns.
— Composable Finance (@ComposableFin) February 20, 2023
In response to claims of a lack of financial transparency at the company, Zaki stated that the company is private and cannot publicly release financial information.
However, “we remain super confident that we have sufficient resources, personnel, and the tech to actually execute upon our strategies […] there is nothing here that causes me concern or should cause the public concern,” he said.
Zaki also denied violating any orders from the SEC, stating that the Series A fundraiser was done completely offshore and was compliant with laws in the countries where it took place. Zaki stated that the company retained legal counsel to ensure that no laws were broken, as he explained:
“Those allegations are incorrect, the series A was designed as an offshore sale of utility tokens and we had outside council advising on the offering […] I had made very clear that all offerings of composable were conducted with sufficient legal council”
As for the claim that Composable was involved with the Bribe project, Zaki stated flatly “we had no part in the Bribe project.”
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Composable Finance is the developer of a cross-chain bridging and messaging protocol. In Feb. of 2022, it raised over $100 million through a parachain auction on Polka Dot. Ten days after the fundraise, noted blockchain sleuth ZachXBT successfully doxxed the company’s CEO, known as “0xbrainjar,” revealing that the CEO is Omar Zaki.
In an April 1, 2019 settlement, the SEC accused Zaki of “repeatedly [misleading] investors in the Fund about assets under management, fund performance, and fund management,” during his role as an executive for Warp Finance and Force DAO. As part of the settlement, Zaki was barred from raising money for investors in the U.S.
However, the SEC action was a civil cease-and-desist order, and Zaki is understood to have not been convicted of violating any criminal laws.
ZachXBT also accused Zaki of being involved with Bribe, an alleged rug-pull scam, in the past.