Investigation into the shutdown of the NFT project NeoNexus: Is it really out of money or a soft exit?

Original Title: NFT Project NeoNexus Ceases Operations: Is it Really Out of Money or Just Soft Rug Pull?

Author: Jasmine, Hive Tech

On the evening of March 21, the metaverse project NeoNexus on the Solana chain announced that it could no longer operate due to insufficient funds. Project founder Jack Shi attributed the "lack of funds" to the decline of SOL and the overall sluggishness of the Solana NFT ecosystem, expressing a willingness to hand over the project to the community.

NeoNexus is an on-chain virtual space project driven by NFTs, allowing users to mint virtual buildings. It is estimated that since September last year, the project has raised 25,000 SOL through NFTs, with revenue ranging from over $3 million to over $6 million.

Now, the claim that NeoNexus has ceased operations due to "insufficient funds" has been questioned by community members as a "chronic rug pull." Some users have been complaining about the slow development of the project on Discord since the end of last year. Amidst the rising doubts, someone posted Jack Shi's resume information on LinkedIn, even suggesting that they would initiate a lawsuit.

In the early hours of March 23, Jack Shi updated Twitter, stating that he was working on a transition to hand over NeoNexus to a team for takeover and had begun discussions with interested parties. As of now, the NeoNexus official website remains inaccessible.

Insufficient Project Funds? Founder Exposed Posing with Supercars

"We can no longer continue to develop the NEONEXUS project healthily." On March 21, NeoNexus founder Jack Shi wrote to users on the community Discord, stating that he would lay off all employees by the end of the month and was willing to transfer the project to the community or a party chosen by the community.

Jack Shi attributed the difficulties faced by NeoNexus to the downturn in the SOL ecosystem, which has led to the team being unable to cover expenses.

He stated that due to the significant drop in SOL prices, the overall activity, trading volume, and interest in the Solana NFT space have declined, making it very difficult to develop and continue the project in such an environment. Their funds were used to pay the salaries of over 20 employees, development and technical costs, legal fees, accounting fees, debts, and all applicable business taxes, "We no longer have enough funds to continue the development of this project."

Jack Shi did not disclose the project's income to date. However, according to official information from NeoNexus, this NFT application built on the Solana chain began selling Golden Tickets, virtual residences, commercial buildings, and other forms of NFTs and property tokens after attracting users through airdrops since last September.

According to public information, NeoNexus has minted 4,000 building NFTs, consisting of 2,000 residential property NFTs and 2,000 commercial property NFTs, with 6,000 NFTs including entertainment, industrial, and public real estate properties yet to be developed.

Neo Nexus NFT Series Still Listed on Magic Eden

It is estimated that NeoNexus raised approximately 25,000 SOL through the minting of a series of NFTs. In the intensive minting months of October and November, SOL peaked at $259 and dipped to $137. Based on this, NeoNexus's fundraising value is estimated to be between $3.425 million and $6.475 million. Entering December, SOL began to decline along with the downturn in the cryptocurrency market, currently hovering around $92.

Although Jack Shi explained the use of funds, he did not list specific expenditures for each item, leading users to doubt the claim of NeoNexus being "insufficient in funds." The slow progress of the project was also mentioned by users on Discord, with some noticing a decline in community activity since December last year, worrying that their minted house NFTs would become worthless; others inquired in January whether the project was still operational, and community administrators advised them to follow the announcements regarding the "residential gallery."

On March 15, NeoNexus was still previewing the minting of entertainment building NFTs, and six days later, the project founder suddenly announced the cessation of operations due to "insufficient funds," and the project's official website became inaccessible.

Jack Shi's claim of "insufficient funds" was criticized by some users as a "chronic rug pull" or "soft rug pull." On March 22, Twitter user zachxbt, known for criticizing NFT fraud, posted a photo of Jack Shi with a Lamborghini, questioning how the project had exhausted its funds.

The doubts surrounding NeoNexus reached a climax, fueled by the exposure of images by KOLs in the crypto community.

Founder Information Exposed, Project Update on Transition

NeoNexus's founder handed the project over to the community with a letter, but he did not provide a detailed plan on how the project should be taken over by the community, nor did he discuss relevant details with users in the Discord community.

After the NeoNexus website became inaccessible, the residential NFTs and commercial building NFTs that had already launched on the secondary market saw a decline. Solana NFT data site SolsWatch showed that on March 22, the floor price of NeoNexus residential NFTs dropped to 0.6 SOL, down from 2.75 SOL the previous day; the floor price of NeoNexus commercial NFTs fell to 0.64 SOL, down from 2.45 SOL the day before.

After Jack Shi was exposed posing with a supercar, his professional background on LinkedIn was also uncovered by netizens. He graduated from Columbia University in 2012 with a degree in Computer Science and Mathematics, interned at the Royal Bank of Canada Capital Markets, and held positions as a Commodity Technical Analyst and OTC Clearing Technical Analyst at that company; from April 2016, he worked as a Senior Developer at TD Securities in the U.S.; in August 2021, he founded Unlock DeFi and launched the first NFT project, NeoNexus.

In most cases, projects created on the blockchain are often operated by anonymous teams, so people were somewhat surprised to find out that Jack Shi is the real-name founder of NeoNexus. Because of this, after the news of the project facing difficulties due to funding emerged, some users expressed their intention to gather team information and relevant evidence to initiate a lawsuit against the project.

In the early hours of March 23, both Jack Shi and NeoNexus's Twitter accounts posted updates stating that they were working hard to transition the project to a team for takeover and had begun discussions with relevant parties, promising to continue updating information to explain the situation.

NeoNexus Update on Transition

Following this update, the prices of NeoNexus's residential and commercial building NFTs saw a rebound, reaching over 1 SOL. Although the project's official website remains inaccessible, from Jack Shi's statements, it seems that NeoNexus may be on the verge of a new turnaround.

As of now, the secondary market platforms listing NeoNexus NFTs have not delisted the NFTs. Given that Magic Eden has established preventive measures specifically against NFT fraud, NeoNexus has not yet been deemed in violation under this program.

Although the situation of NeoNexus remains unclear, "rug pulls" in the NFT market are not uncommon, often referring to a type of exit scam where anonymous developers suddenly leave the project with investors' money.

Previously, the NFT project King of Chess on Magic Eden ran off with 645 SOL from investors, worth $58,000 at the time; another project, Balloonsville, caused even greater losses, defrauding investors of 5,000 SOL, valued at nearly $600,000 at the time.

The appearance of rug pull projects on Magic Eden not only cost the platform in refunds to buyers but also damaged its reputation.

In February of this year, Magic Eden implemented new security protocols requiring creators to undergo KYC verification before launching NFT products and fundraising on the platform. Each project must sign a cooperation agreement before being listed, and team leaders must submit the agreement privately to the platform before publicly listing their works. Additionally, projects must hold their funds on the platform for at least 24 hours or choose to extend the holding period by 14 days to prove the project's legitimacy. The platform aims to prevent "rug pull" scams through these measures.

"Anonymity" may be a fundamentalist reflection of the crypto community, but for users, anonymous projects often carry the risk of rug pulls. How to achieve "decentralization of trust" is also a key principle of blockchain, and implementing this concept through technology in applications may still require a long way to go.