The Rise and Fall of PEPE: Unequal Distribution of Spoils or Premeditated Runaway?

*Written by: Qin Xiaofeng, * Odaily Planet Daily

In the past few days, the Meme project PEPE has staged a "mysterious" sell-off drama.

In the early hours of August 25, Beijing time, the PEPE team's multi-signature address transferred over 160 trillion PEPE (approximately 16 million USD) to four centralized platforms (OKX, Binance, KuCoin, and Bybit exchanges) for sale, causing the PEPE price to plummet by more than 25% at one point, currently maintaining at 0.00000087 USDT.

According to monitoring by CryptoNoddy, the reason for the massive sell-off was that the PEPE multi-signature wallet changed the threshold from 5/8 to 2/8, meaning that only 2 private key holders are needed to sign a transaction to transfer team assets.

The news caused an uproar in the community. However, it wasn't until a full day later (August 26) that the PEPE team responded. Odaily summarized the key points of the announcement: three former members privately deleted multi-signature permissions to sell tokens, and the remaining tokens are currently safe and will be planned for future destruction.

Did Former Team Members Maliciously Sell Off?

The announcement stated that since its establishment, PEPE has been plagued by internal disputes, with some team members becoming bad actors due to arrogance and greed. Previously, due to the inability to sign transactions, disagreements, and weeks of being unreachable, these individuals hindered the team's progress in using the multi-signature wallet for donations or token purchases— the multi-signature setup required 3/4 signers to be present for approval. Three former team members secretly returned on August 25, modified the multi-signature threshold, stole 60% of the tokens in the multi-signature wallet, which is that 160 trillion PEPE, and sent them to trading platforms for sale.

The announcement stated that the remaining 100 trillion tokens in the multi-signature wallet are safe and that the former team members can no longer access them. The PEPE team indicated that the prospects after resolving internal conflicts are bright, and they are currently planning to use the remaining tokens to purchase the PEPE domain name, with the remaining tokens to be destroyed in the future.

（PEPE Announcement）

However, this seemingly transparency-enhancing announcement triggered further skepticism from the community.

MCVERSE founder McOne discovered that the number of addresses approving the multi-signature reached 5. "There must be more than 3 people involved. It looks like there are 5 signers." As shown below:

CryptoNoddy also confirmed this finding and speculated, "Unless everyone controls two addresses. But it should be disclosed because these signers are essentially the same." Furthermore, he found that after the announcement, the multi-signature address still retained the attacker's signing permissions— in other words, the attacker could continue to withdraw funds, meaning the remaining 100 trillion tokens are not safe at all.

Many community users expressed distrust towards the PEPE announcement:

• "It's just a crude fabrication of a story."

• "How do we know you didn't plan this from the beginning so they could sell some PEPE and pocket the profits? The whole thing is suspicious, like a pre-set drama."

• "This is 100% nonsense. You took so long to release this thing?"

• "Destroy the remaining tokens, and let's see if what you said is true."

• ……

Ultimately, amidst the community's skepticism, the PEPE team transferred the remaining tokens to a new address: 0x9f5E46E4990dee30665b2e803BA134564D1e087F. Meanwhile, the PEPE team stated that the Telegram group has been disabled, and the group owner's old Telegram account was hacked, with the group taken over by hackers. Currently, PEPE is working to restore access or create a new account; during this period, all official notifications from PEPE will be released through the X platform account, and the new Telegram group link will also be shared via the X platform (Twitter) account.

Regarding other core issues of concern to the community, the PEPE team did not respond. First, concerning the tokens sold by former members, will they be recovered and how, and who will bear the losses of the PEPE community? Second, who controls the new address where the remaining assets are located, and is the remaining multi-signature address controlled by one person or a few? Third, what are the future plans, when will the remaining tokens be destroyed, and what is the transparency of token usage?

Founder Identity Exposed, Suspected Insider Trading

Given that PEPE is a project created by an anonymous team, there has been no personal information about the three involved members in recent announcements. However, this sell-off has angered the community, and some "insiders" have voluntarily exposed more information.

KOL PAULY, who has over 150,000 followers, stated that the "truth about the multi-signature selling tokens" published by PEPE is completely a lie, and he, Matt Furie, and the entire community have been deceived by the PEPE team.

He stated that the true identity of the PEPE founder is Zachary Testa, who currently resides in Arizona. Zachary often uses the accounts z (@degenharambe) and Lord Kek (@LordKekLol) on social media. Zachary Testa was born in 1997, graduated from Arizona State University in 2018, and is currently a professional photographer.

PAULY accused Zachary Testa and his team of making huge profits through PEPE (even buying a Lamborghini) without giving any compensation to Matt Furie, the original creator of "Pepe the Frog." Additionally, PAULY stated that he helped the PEPE team contact the Binance listing team and the SushiSwap team, which enabled PEPE to be listed on Binance. PAULY also mentioned that Zachary Testa has had multiple violations in real life while doing photography— repeatedly violating laws in areas where drones are prohibited, being fined multiple times by the National Park Service, and being placed on the blacklist of the public organization publiclandshateyou.

Moreover, PAULY condemned the project for insider trading and disclosed an address of a former PEPE member (0x22f6215b40434d9135b06f1c676fd9291936aac3). It is understood that this address spent 0.0183 ETH (36.73 USD) to buy 16.9 trillion PEPE after the PEPE genesis and then sold it for 1001 ETH (1.73 million USD), achieving a return of 54,725 times.

In fact, the insider trading among PEPE team members has long been an open secret. Just in the past few days, another suspected team member's address also cleared out its PEPE tokens. According to on-chain analyst Yuzhen, this address spent 0.03 ETH (about 60 USD) to buy 24.3 trillion PEPE on April 15, sold 554.7 billion PEPE in batches from May to July (approximately 670,000 USD); on August 25, during the PEPE sell-off, this address sold the remaining 18.8 trillion PEPE (approximately 1.67 million USD), with total profits exceeding 30,000 times.

PAULY also revealed that the PEPE official team holds PEPE worth 16 to 17 million USD in at least 9 internal wallets— not limited to the currently disclosed remaining 100 trillion PEPE. The reason for not selling off during the crash is to create short positions through centralized exchanges for greater profits. Finally, Pauly called on everyone to report to the SEC: "When the sanction amount exceeds 1 million USD, the whistleblower reward can reach 10% to 30% of the funds collected."

In the face of this calamity, the most important thing for PEPE moving forward is to rebuild user confidence, and timely disclosure of more information to increase transparency is crucial.

"It needs to be clear that what happened with PEPE is extremely optimistic in the long run. It's better to get rid of bad actors who occupy a large proportion of the supply now than to wait for it to happen later." On-chain analyst Yazan remains optimistic about PEPE's future development, but he also calls on the PEPE team to take responsibility and guide the project to develop better. "We just hope to see people take responsibility."