It’s been a while since we’ve had an update on Civil, the something-something-blockchain journalism startup that got a ton of media attention before its unsuccessful token sale last month. Civil’s leadership said that it would regroup and figure out a new path forward.

Among the messaging: They would still sell tokens, but in a new way TBA. Civil as a company wasn’t going away. And “it was never about the tokens.”

Great piece and spot on. It was never about the tokens. It’s about the journalism. Tokens are a means to an end. More on next steps very soon. Meantime the newsroom continue to kick a** https://t.co/gn69E8qIIV — Vivian Schiller (@vivian) October 31, 2018

The thing is — and I say this with all respect to Vivian Schiller, whose work I have followed and respected for a decade — it really is about the tokens, which are literally the only things that distinguish anything Civil does. The decentralized governance piece, the micropayments piece, the maybe-we’ll-all-get-rich piece — all of those elements that Civil promised (or teased to varying degrees) depend on a token with a value.

(Go ctrl-f for “token” on the Civil White Paper and tell me if tokens look central to what Civil is doing.)

That core reality was reinforced by the fact that all the journalists working for Civil’s “newsrooms” were compensated with a mixture of actual you-can-pay-rent-with-it cash and CVL tokens. Journalists were allowed some leeway in what share of their salary would come in token form — a bet, in essence, on how much you think those tokens’ value would eventually grow. But tokens weren’t a bonus: they were a significant part of every journalist’s salary.

I’ve heard grumblings for some time that a lot of Civil’s journalists were…unhappy with how this arrangement had turned. After all, a token has to have a value for it to be part of your compensation. If you’re due $20,000 worth of tokens, the number of tokens you receive will be different if a token is worth 10 cents or $1 or $100.

Analogy time: Let’s say you get hired by Google and it grants you 1,000 stock options. The value of those and all stock options is determined by “the market” — whether that’s early-stage investors or regular old GOOG stock traders. They determine what, if anything, your options will be worth. But without a successful token sale to set that value, CVL tokens — and thus a significant piece of journalists’ salaries — are stuck in limbo.

It has always been about the tokens.

I’ve been hearing these concerns for a while, but the first voice to go public with them is Jay Cassano, who was until recently a staffer at the Civil newsroom Sludge. Cassano announced his departure two weeks ago:

A quick personal update: I've left my position at @readsludge. I have some things in the work for the next couple months, though I'm not sure what comes after that. So feel free to shoot me jobs that you think may be of interest. Or I may decide to keep freelancing for a while. — Jay Cassano (@jcassano) November 13, 2018

But yesterday he went further:

Those Civil tokens were 70% of my pay for 5 months. I still haven't received any. I and every other reporter working for Civil newsrooms have been defrauded by the company. — Jay Cassano (@jcassano) November 26, 2018

.@matthewiles at one point even speculated — on a call with all of Civil's First Fleet reporters — that the tokens could be worth as much as $3.00 each. — Jay Cassano (@jcassano) November 26, 2018

Pretty much all of the other First Fleet reporters I've spoken to are disgruntled with Civil. They won't say it publicly because they're reliant on Civil to disburse their newsroom's grant every month. I left Sludge in part so that I could speak freely about this. — Jay Cassano (@jcassano) November 26, 2018

Cassano (and others) spoke to the crypto-industry news site CoinDesk about it:

According to several current and former employees of news organizations sponsored by the blockchain startup, Civil told journalists in its 18 newsrooms around the U.S. that the CVL cryptocurrency — which, when issued, was supposed to comprise part of their pay — would probably end up being worth several times more than the estimated valuations mentioned in meetings and reported in tax forms. Yet lackluster demand caused Civil to cancel a public sale of the tokens last month. Now, the reporters have no idea if or when they’ll be paid the tokens that were supposed to be part of their compensation. Meanwhile, the platform, conceived as a collaborative network where readers would pay for quality journalism and journalists would earn money for content, remains unfinished. The newsrooms, which employ dozens of journalists, are operating normally, but without the tokens originally meant to provide a compelling value-add for users. “Civil can talk all it wants about creating a new future for media, but the reality is it’s being built by putting journalists into debt,” said Jay Cassano, who left the Civil news outlet Sludge on Nov. 8 because, he said, undelivered tokens made up roughly 70 percent of his salary for five months. “I had to borrow money to pay my rent and student loans,” Cassano told CoinDesk.

I can’t say whether Cassano’s talk of “fraud” is fair or accurate in legal terms. My general impression from following Civil for a while is that its leadership has good intentions — though coupled with a wildly mistaken view of journalism’s most important problems and way too much blind faith in the Magical Power of Crypto to solve the world’s concerns.

But even people with good intentions can still do stupid or self-serving things, of course. And I can confirm, from quite a few conversations with Civil journalists, that others share his concerns, feel deeply frustrated by the communication they’ve received from Civil execs, and, broadly speaking, feel screwed over.

Civil CEO Matthew Iles disputed Cassano’s account to CoinDesk:

“We didn’t promise anyone tokens would be worth any specific amount,” he told CoinDesk. “Anytime we discussed potential token value with newsrooms, we made it clear we were making estimates and that there was risk involved.”

Note that Cassano said in the story that Civil told them CVL “would probably end up” being worth more, not that they were “promised” — a claim he didn’t make until later. But I’ve heard from multiple Civil employees that yes, they were led to believe something around 75 cents was where a CVL token would be valued. From CoinDesk:

Specifically, according to Cassano, Civil told reporters working with its sponsored news operations that the CVL token they would be partially paid in could be worth around $0.75. However, on tax documents, the tokens were valued at a fraction of a penny. Iles would not comment on that difference. “They kept hyping it up internally to keep us in line, saying they were even going to exceed that valuation,” Cassano said. “Iles, at one point, said he expected the tokens to double or quadruple in value compared to what was written in our contracts.” A second Civil reporter, who still works at one of the newsrooms sponsored by the startup, told CoinDesk the startup’s leadership “absolutely” talked up the token’s growth potential to employees. “The expectation was they were going to be able to get rich off of it,” the source said. According to this insider, who spoke on the condition of anonymity, days before the token sale flopped, Civil addressed reporters’ concerns about it by saying that crypto “whales” would buy up unclaimed tokens to help the startup reach its threshold goal.

What Cassano says here — the assurance that whales would buy in, that the token values were hyped up — matches what I’ve heard from other Civil staffers. Both the weekly video chats that Civil journalists hold and their internal Slack have featured quite a few complaints about token valuation, the failed sale, and even basic things like getting paid on time. (One source with direct knowledge told me Civil failed to make payroll at one point earlier this fall, something I have internal correspondence to confirm.)

There are a couple different issues at play here.

One is that Civil staff expected, just as Civil leadership expected, that the token sale would work out. But after being pushed back and then falling wildly short of expectations, there was no market-defined value for CVL, which meant tokens couldn’t be distributed. This image from a Civil blog post shows how many people and newsrooms were expecting tokens; it’s probably somewhere around 200 people in all who thought they’ve have CVL in their wallets by now.

If you expect money (or, well, assets that have a value you can at least theoretically convert to money) and then you don’t get it — sure, you’re going be upset.

But if Civil does what it says and comes back with another token sale — one that doesn’t rely on hitting on a set level of investment to happen — then those tokens will have some value and they can still be distributed. Whenever that happens. You’ll get your tokens, just later than you were led to believe. (On October 16, Civil said the new sale would happen in “weeks, not months.” Narrator: It’ll be months.)

Here’s Civil cofounder Matt Coolidge:

Refunds and grants are different categories entirely — and we're honoring the terms for both categories. We want to see CVL tokens go live ASAP and are working hard to do so – but won't compromise the long term welfare of the project by doing it haphazardly. — Matt Coolidge (@mattcoolidge) November 27, 2018

(Allow me an aside: Tokens only really have value if someone is willing to pay you for them. Even if Civil does come up with a new and better sales approach, the failure of the initial sale makes it clear the market for CVL is…well, soft, to be generous. Instead of selling all 34 million tokens at once — the initial plan — they’ll now probably be sold piecemeal. Which means the resale market is unlikely to include a lot of people willing to pay Civil journalists for their tokens — for a long time. And that would be true even in the context of a healthy broader crypto market, which this most certainly is not; ethereum, the cryptocurrency CVL is based on, has lost 56 percent of its value just since September 21.)

So that’s one issue: a delay in getting what you expected. Here’s David Moore, who was Cassano’s boss at Sludge:

folks in the newsrooms are on the same page, that CVL tokens will be distributed as soon as possible, after token sale didn't reach its soft cap last month. Stay tuned for more on that from Civil. Dozens of working journos across sites are getting regular updates and latest info. — David Moore (@ppolitics) November 27, 2018

The other issue, valuation, is much thornier and will involve — actually, has already involved — lawyers. Was a certain token value promised? Or was it just strongly implied, with the ultimate risk nonetheless left in the hands of the journalists? Is it “fraud,” as Cassano claims, or just a bet a bunch of journalists made that didn’t work out?

. @Civil is a startup in a highly uncertain and speculative new industry; this reality was never hidden, and should have been very apparent to any real journalist. Those that chose to get involved, and now claim damage, should probably look within.https://t.co/yWScXr8B7C — Teymoor Nabili (@teymoornabili) November 27, 2018

This is brutal for the journalists stuck in @civil’s wake, but also the end result a lot of us have been saying for a long time. It’s a scam at worst and an unnecessary, unregulated security at absolute best that journalists were desperate to believe in. https://t.co/kGrUfzxfas — Christopher Guess (@cguess) November 27, 2018

The answer to that will come down to paperwork and memories about who said what in what meeting or in what email. Cassano says he has “the documents to prove it,” as at least one other Civil employee has told me. But I haven’t seen those documents, and another Civil source told me the company “was careful not to put the valuation in writing.” Some Civil people have characterized the CVL portion of staffers’ compensation as like those stock options I mentioned earlier — maybe they’ll turn into real money someday, but they’re not something you should count on.

(I should note that none of the Civil journalists I’ve spoken with have viewed it that way. Taking more of your salary in tokens meant taking less of it in cash. And again, they like paying rent.)

Here’s Schiller, who heads the Civil Media Foundation, saying journalists’ contracts “clearly state that token value cannot be guaranteed”:

The first newsrooms all received cash grants which are being paid. In addition, we also committed to giving them tokens. Tokens will be distributed, as contracted, once we launch. (More on launch soon!). All materials clearly state that token value cannot be guaranteed. — Vivian Schiller (@vivian) November 27, 2018

And Moore again:

I was pleased to work w/ Jay past 8 mo's. Sludge employment agreements do not include due date on CVL; many dozens of reporters understand we're waiting for distribution. Sludge employees reviewed & signed a Sept. token grant agreement w/ ten clauses on Recipient Representations. — David Moore (@ppolitics) November 27, 2018

It’s also worth noting that Moore says journalists have been paid “full cash salaries” for the “past few months.”

Cassano tweeted that a potential $3.00 valuation was discussed in a call with Civil’s “First Fleet” of journalists. Those first Civil newsrooms were announced more than a year ago. I’ve been told by multiple sources that months earlier this year, Civil was still citing a $3 token value in discussions with potential publisher partners. Again, this would be months after the initial Civil newsrooms had agreed to whatever deal they’d agreed to.

Here’s Moore and Cassano having an HR back-and-forth (Twitter!):

as we reviewed, your Sludge employment contract is silent on when the CVL tokens will be created and distributed- so, with updates from Civil after initial token sale didn't reach soft cap, newsrooms understand they're forthcoming. Dozens of reporters are getting regular updates. — David Moore (@ppolitics) November 27, 2018

It’s important to note that, even if the initial token sale had gone perfectly and been fully funded, CVL’s valuation would’ve still been lower than what Cassano and others say they were led to believe. Had that sale happened, CVL’s valuation would have been defined by how much money was raised. If they’d hit their top goal of $24 million, one CVL token would’ve been worth about 70 cents. If they’d only barely hit the $8 million soft cap, it’d have been worth only 24 cents. But again, they didn’t come anywhere close to that. Excluding two purchases by ConsenSys — Civil’s crypto parent — it only raised about $300,000. Which — again, if the sale had gone through at the level the market said it wanted to provide — would have put the value of 1 CVL somewhere around 9 cents.

If, as Cassano says, he was contractually promised 37,500 CVL tokens, that range of potential valuations is the difference between $112,500 (at $3), $28,125 (at 75 cents), $9,000 (at 24 cents), and $3,375 (at 9 cents).

Those differences are, to state the obvious, pretty darned significant for most journalists!

On one hand — and it’s important to remember this! — this is all imaginary money. CVL is a fiat currency just as much as the U.S. dollar — only without the Federal Reserve and the Treasury bonds and the history and the armed forces to back it. Should he ever get them, Cassano’s 37,500 CVL tokens will be “worth” only whatever someone will pay him for them, and the signs are pretty uniformly poor for that to happen, no matter where the lawyers end up leaving all this.

But my very strong impression from talking with Civil journalists is that they did not sign onto Civil because they had deep interest or faith in a crypto-driven model for journalism. They did it because Civil was offering money to journalists, and they liked doing journalism and being paid for it. That’s great! And if the final legacy of Civil ends up being a bunch of bad decisions and roughly a year’s worth of journalism from a lot of talented journalists, that ain’t nothing. But I hope that Civil can find a way to keep up what a lot of their employees, at least, see as its end of the bargain.

I want to include here the full comment Civil’s Matt Coolidge left in the Civil Telegram channel, since it’s the closest thing we have to a full statement of Civil’s position on Cassano’s complaint. I’d quibble with a few parts of it but I leave it here for the record.