Opinion: TFT is a threat to our club - the EFL must now do its job properly & protect Sunderland AFC

What a wild couple of days it's been, boys and girls. Are you enjoying it? I am certainly not.

Over the last week, I have dived deep into the world of properly-regulated tokenised assets on the assumption that nobody would be so stupid as to invite crypto scammers into our club.

I researched the legalities, the possibilities, and the technologies that are already available that might allow proper fan ownership through crypto tokens and blockchain technology.

Photo Illustration by Sheldon Cooper/SOPA Images/LightRocket via Getty Images

Then, as soon as I saw the name “The Fans Together”, I quickly versed myself in the specifics of that start-up, of which I’d been vaguely aware of and dismissed as fantasists when they first came to prominence this year, so that I could provide you - my fellow Sunderland fans - with a sober and informed grounding in what the hell we’re looking at here.

It’s long, but please do read it if you haven’t.

But if you literally cannot stomach 4,000 words on the ins and outs of this crazy new world of crypto, here are the main takeaways that matter for the next few weeks:

• “The Fans Together” (TFT) is a blockchain-based start-up Decentralised Autonomous Organisation (DAO). DAOs have no legal basis in the UK. They cannot own property. They cannot own shares.
• TFT has owned 20% of a Greek tier 2 regional side FC Episkopis for three months.
• They plan to issue a new crypto token - the $TFT. This they are marketing as an unregulated leisure or Utility token.
• Although they say they are all about fan ownership, they are careful to say that this token is not actually a share in the club.
• However, the Financial Conduct Authority says its ordinary regulation of financial products applies when they are classified as Security tokens, that is when they “have characteristics which mean they are the same as or akin to traditional instruments like shares, debentures or units in a collective investment scheme”.
• TFT have not yet issued any of its new crypto tokens and are not issuing tokens to fund the deal. If they have money to complete the deal, it comes from an as-yet-unknown outside source.
• The people behind this venture stand to make a lot of money if people buy their crypto in order to gain limited rights to vote on some matters about the running of club, but these are as yet unknown and KLD and Sartori will remain in control as they hold 61% of the actual shares.
• If fans do not buy into the token when it’s launched, TFT will have no money to invest in the club.
• They will offer the Red & White Army Supporters Trust 20% of their stake in Sunderland AFC and a seat on the board in exchange for their support.
• They will try to convince fans, the Red & White Army, and the EFL that they have a unique and groundbreaking technology with no downside risks.
• All they have is an idea, 20% of a tiny Greek football club, and some pretty crap merch.
• Most importantly, they purport to be a vehicle for a proportion of fan ownership of the club - this is simply not true. It is a glorified fan token.

I got one thing wrong, however - I said we shouldn’t be hostile per se. After listening to the experts and learning even more about the legal status (or lack thereof) of a DAO, I think we should be openly and unambiguously hostile.

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After publishing the article on Tuesday, our Roker Rapport Podcast sat down for in-depth conversation this Tom White from Sky Sports, which is out there for you to listen to now.

Combined this with what Martin Calladine and James Cave have been outlining on Twitter regarding the issues we all should have with crypto tokens in football in general and with TFT in particular, nobody listening will be left in any doubt as to the inappropriateness of these people as investors or owners in our club.

If what Tom White says is true, however, and despite the fact that a DAO cannot own shares, the offer for the shares has been accepted by Donald & Methven and the success or failure of TFT’s bid for 39% of Sunderland AFC is now down to the EFL’s processes, we should be extremely worried.

Tom asked Rich who we as Sunderland supporters should be angry at. Well, I think we should be angry at Donald and Methven for abdicating responsibility for who buys their shares by placing them with a broker, and then not even doing the simplest of checks to see whether this DAO was trustworthy and capable of completing this deal.

This isn’t a deal that’s come out of the blue, we now know that it’s been in the offing for months. These are not stupid people, they’re paying this broker to actually find a suitable buyer and surely they have a decent corporate lawyer who can use Google?

They must know that in 2021 the Advertising Standards Authority ruled that Arsenal’s Socios tokens were in fact Security tokens not Utility tokens, i.e. that they were financial products. They must know that the token market has been tanking for months as people realise that, without real-world assets behind it, it's a castle built on sand.

Yet for some reason, perhaps because they are trying to force KLD’s hand, who knows, they have pushed ahead shamelessly with this deal.

Photo by Kirsty O’Connor/PA Images via Getty Images

I think, as Rich expressed in the podcast with Tom White, we should be very angry at TFT for coopting the language of fan activism, fan ownership, fan participation, and fan engagement to hook people into their cryptocurrency and their NFT platform. They are explicit in their White Paper that this is akin to gambling.

We should be annoyed that their attempt to gain a part of our club has consumed so much time and energy already and that it has clearly distracted from the transfer business, commercial developments, and fan experience improvements that Sunderland AFC should be focused on.

And it is not, I repeat, not fan ownership.

But, nevertheless, now the deal is apparently with the EFL. I doubt very much the EFL’s capacity to even comprehend what TFT is let alone be able to ask pressing legal and technical questions about how they plan to finance the necessary ongoing investment in the club.

And, given that football authorities in England and across the globe seem completely in awe of the money they think can be made and leveraged into their industry from the crypto world, I think we have good reason to doubt that they will ask too many questions even if they do understand what a DAO is and is not, or the risks of crypto speculation.

But even if they don’t get the tech element, we need them to at least get the fundamentals right. Who is Simon Wentwork/Mycock? How does TFT “own” the 20% of shares in FC Episkopis? We and the EFL need to know where the money for their share purchase comes from, and what kind of vehicle they propose to use to conduct the transaction, and its relationship to the FTF DAO.

We and the EFL need to know who would be in effective control of that proportion of Sunderland AFC, we and the EFL need to know who they will seek to appoint to the club’s board.

Photo by DeAgostini/Getty Images

We cannot be put in the position Wigan was in when the EFL approved the exchange of ownership in that club to settle a gambling debt. Even though the majority of the club's shares are not at stake here, having an incapable, inexperienced, unfunded shareholder without a legal basis and with only a White Paper for an as yet unissued cryptocoin to its name involved in any capacity would be a drag on our club.

It would prevent the investment needed to take forward all aspects of Sunderland AFC on and off the pitch. It would be a distraction from the job at hand, consolidating in the Championship and then pushing on to get our teams back to the Premier League and WSL.

The EFL will hopefully prove me wrong, they will have the proper tech expertise, lawyers, and regulators on hand, and will listen carefully and act cautiously to evidence not crypto spin. It shouldn’t take them long to understand that a DAO cannot own anything, let alone shares in an English football club, and send TFT packing.

If we read KLD’s statement from Tuesday night, it is abundantly clear that he and Juan Sartori are not in favour of this deal, despite some of the inconsistencies with what Tom White has told us about the contacts between the club and the current regime.

As I mentioned in the big article, they and their families know this sector very well indeed, they know the risks, and they know the regulatory frameworks. We can only presume that, as the biggest club in the EFL, the Sunderland board has enough power and influence to kill this ridiculous idea dead in the water.

Photo by Robbie Jay Barratt - AMA/Getty Images

After the TFT deal has, hopefully, been laughed out of town, attention will rightly turn back to Donald and Methven. These two must take responsibility for the sale and transfer of their shares to appropriate, serious, well-resourced, and competent people.

That’s what they said they would do back in January and February 2020. If they’re engaged in some sort of PR stunt in order to force the hand of the other shareholders, or to force up the price of their shares, they need to get real. This is not a game.

Indeed, I and many fans would much rather they stayed as shareholders, repaid the parachute payments in full, and were held to funding the investment plans of the club overall than see their minority stake go to some as yet undefined crypto platform that clearly plans to profit directly off the back of Sunderland supporters.

Perhaps, in their Machiavellian way, that was the purpose all along - better the devil you know and all that.

But it won’t work. Donald and Methven are rightly persona non grata amongst all but a weird extreme fringe of the Sunderland fanbase, now more than ever.

We are not here to be experimented upon or innovated with, let alone exploited. We, the fans of Sunderland AFC, simply will not have it.