Pixelmon: A home-grown NFT scandal

A couple of weeks ago I noticed a video from a YouTube channel I keep an eye on for its coverage of cryptocurrency scams that looked interesting - the tale of Pixelmon, an NFT project that had recently sold over 7,000 NFTs for a grand total of around NZ$100 million. By the end of the week, Stuff and 1News had covered the story. Why did this project make the news here in NZ? Because the NFTs had been unveiled, and they were abysmal. And why did this story pique my interest? Because the person in charge of the project had been “doxxed” (had their identity revealed), and a screenshot of their LinkedIn profile in the video I watched showed that he had recently graduated from the University of Waikato - so it appeared he was one of our own, a Kiwi.

NFTs for Dummies

A quick NFT primer for those not in the know. NFTs (Non-Fungible Tokens) are a way to use a blockchain (blockchains are also used for cryptocurrencies) to store a token that records ownership of a digital asset (maybe an image or a piece of text). Of course, digital assets can be copied - many people can have a copy of the same image, use them as their desktop wallpaper, etc. But an NFT is a form of recognition that the creator of that digital file has sold it to someone, who is now its “owner”. Using the blockchain to record a change of ownership, that token can be transferred to someone else in exchange for payment, and so NFTs can be bought and sold.

At the moment, many people see these tokens as a way to make money. For many NFT investors, what they're buying doesn't really matter - what they're interested in is whether the price of their purchase goes up - because if it does, they make a profit. This relies on an idea that is at the heart of so many scams, the Greater Fool theory. And many of the NFTs that are being produced and sold at ridiculously high prices, like the Bored Apes collection, are hideous looking. These images are usually put together by software from a base template (in this case an ape's face) and a set of accessories (background colour, t-shirt, hat, mouth, skin colour, etc). The software can vary how often each of these accessories appears in the collection, leading to some NFTs being worth more money because of the rarity of something like a tobacco pipe in the ape's mouth, or a gold coloured background. Here's an example of Bored Ape NFTs that have sold for over $1 million each:

Hideous, aren't they? But as I said, people aren't buying these because they're amazing works of art, or cool, unique profile images that reflect their personalities - they're just interested in whether they can make money by holding onto these assets as their value increases. If you want to learn more about the ridiculousness of NFTs, I'd highly recommend the video "Line Goes up", from Folding Ideas, on YouTube:

https://www.youtube.com/watch?v=YQ_xWvX1n9g

Pixelmon

Okay, enough of the background on NFTs. So, what about this Pixelmon project? What's being sold, and what's the issue with it?

Pixelmon has been advertising itself as a Pokemon style game, using pixelated 3D graphics - hence the name: Pokemon is short for Pocket Monsters, and Pixelmon is short for Pixelated Monsters. The project was being run by someone who was known as Syberer online, an anonymous account.

An aside: one of the (many) weird things about NFTs is that anonymity for creators is considered normal. There's an internet term that many of you will have heard of: “doxxing”. Dox is short for “document drop”, and it describes when someone's private information, such as their home address, phone number and the like, is released to the public online. But, in NFT circles, people talk about a creator being “undoxxed”, which means that they're anonymous. This newly minted term (pun intended, for those who already know a little about NFTs) suggests both that anonymity is a regular occurrence for creators, and that the uncovering of who's behind a project is also a frequent event.

The NFTs were sold via a Dutch auction, and ended up going for up to NZ$13,000 each. Bear in mind here that the promise has been that these characters will be playable in a game. Most AAA games (the most technically advanced, professional games) cost around NZ$100 to buy - so paying two orders of magnitude higher than this for a game character makes very little sense. Rather than bidding on a character, you were bidding on an egg - and this egg could be hatched to reveal the Monster you would use in game.

Since the auction, the owners have been waiting patiently for the opportunity to hatch the digital “eggs” they had purchased. When reveal day happened, about a week ago, many purchasers were not happy - the NFTs that were delivered were of a very mixed quality. Some looked okay, if a little simplistic, but others were laughable. Some were so badly coloured that they looked like a three year old's painting. Some, like the dragons, were presented hovering in the air and tipped over by 90 degrees. And some were so small or badly aligned that they weren't even visible above the square of grass they were presented on. The contrast between the promise and reality was stark:

The Promise

Reality

It turns out that Martin had spent the weeks before release frantically paying freelancers online to help him make some of these images. At least one artist said that they had no idea their work was going to be used as NFTs, and that if they'd known they would have refused to do the work - NFTs are looked down upon by many artists, due to their reputation for being used to scam artists and buyers alike.

This “doxxing” I mentioned is what happened to Martin after the disastrous release of these NFTs. Presumably someone who was unhappy with their $10,000 monstrosity did a little internet sleuthing and found out that he's a 20 year old kid with absolutely zero experience in NFTs, digital art or game development. But what does this mean for the project?

So, is this a scam?

So, how likely is this to end up being a scam? I want to think that this is simply a case of youthful naivety - that Martin has found himself way over his head. But there are worrying signs that he's complicit in, at the very least, over-promising.

Martin tweeted about the project late last year “Pixelmon is the next blue chip. This is financial advice. Don't do your own research.” This seems like the opposite of good advice, even if it may have been tongue in cheek. After all, we all know sarcasm doesn't work well on the internet.

The anonymity is suspicious. It seems obvious to me that you really want to know as much as possible about whoever is behind a project that you plan to invest in. After all, you really don't want to be putting your money into one of the many rug pull projects that will end up seeing your investment going down the drain. So although I think Martin trying to maintain anonymity was probably a good thing from the perspective of making the most money, it certainly doesn't seem like an ethical thing to do.

Although cryptocurrencies offer a measure of anonymity, all transactions are linked to an account. And it turns out that the account which received the money for the auction very quickly spent at least US$1 million on high value NFTs from other collections - and yes, apparently that includes at least one ugly ape. Spending this much money this quickly doesn't look good.

Martin has absolutely no expertise in game design. So he's hired the services of Magic Media, a development studio that appears to have expertise in concept art for games, but not for actually making games. Their portfolio has some nice looking images, but is lacking in examples of any game they've worked on, let alone built by themselves.

Martin has admitted in the Pixelmon Discord chat group that he has paid several chat moderators around $300,000 each for the few months of part-time work they have put into the group. Large undeserved payments like this suggest, at the very least, gross mis-management.

Many buyers have been asking for refunds, but Martin is refusing - telling them instead that they can resell their NFT to recoup their costs. However, it appears that the price that Pixelmon are trading for has dropped to just 10% of their original price, with the exception of the green monster from the screenshot above (bottom left) - he's been named Kevin, and has become enough of an internet meme already because of how amateur he looks that Kevin NFTs are actually selling for about three times what people paid for them!

It's all just a little bit of history repeating

It turns out that this isn't Martin's first project, as he's previously run failed Kickstarter fundraising campaigns, including one for a board game called Psycho Chickens. A browse of the Comments for this Kickstarter is telling:

“It's late 2021 sent us our game or give us our money back. Covid isn't an excuse anymore. And reply our messages. We helped you to get your goal, now it's you're turn to give us our reward.”

“Just checking in, was told would be shipped out about 8 months ago and I still have not revived this”

“Still waiting as well. Is there a way to get our money back at this point?”

He also set up a company in 2020 to help people fundraise for making YouTube videos - VidFunder. That website (vidfunder.com) is already defunct, giving a 403 (Forbidden) error - although a little poking around shows the shell of a demo site and a promotional video still online.

In a YouTube video for the 10,000 Dreams series, when asked about what his dream is, Martin responded:

“To create businesses that are all built around the idea of bettering the lives of other people and the planet through innovation… thanking and praising God, because everything I have, I have because of Him, and everything I'm going to do I am going to do because of Him and His blessing”

The take-home message

Whether this is a deliberate scam or not, I think there's a very high chance that the people who put money into this project aren't going to get good value for money. The likelihood of there being a game at all seems slim, given Martin's previous lack of ability to deliver a product, and the likelihood of there being a AAA quality game to play at the end of it all seems vanishingly small. My prediction is that Martin has found himself way out of his depth, and that he will eventually give up and walk away from this project a rich man, having spent a few million dollars of his ill-gotten gains on a second go at delivering a set of JPGs to his patrons, and maybe a half-hearted attempt to find someone to make the game for him.

It's obviously disappointing to see a Kiwi perpetrating a scheme like this, and even more frustrating given that this is meant to be Martin's way of praising his God - what kind of god would want their followers to exalt their name with this kind of shenanigans?

Sadly the government has been quick to say that it doesn't regulate high risk schemes like NFTs and cryptocurrencies, so those who are likely to be harmed by this are unlikely to have much in the way of legal recourse.

Finally, as skeptics I think we would do well to stay away from get-rich-quick schemes, due to their unethical nature (even if there's a chance you could get in early and make money from the Greater Fool). And, as an extension of that principle, I'd recommend we also give our friends an ear-bashing if we hear them say that they're thinking of investing in a cool new NFT collection that's coming online soon.

If none of my warnings about NFTs have convinced you that it's a bad idea to invest, please [contact me](mailto:mark@honeychurch.org). I'm thinking of taking QAnon's back catalogue of messages - Q Drops - and turning them into a collection of NFTs. Who knows, if you buy one from me you might find yourself in possession of a valuable virtual token, and if not you will at least be able to console yourself knowing that when I pull the rug out from under you, and walk away with your money, I will be putting it to good use furthering the cause of skepticism.

Line Goes Up – The Problem With NFTs