What really happened to Primalbase?

The mysterious disappearance of the crypto company that promised to revolutionise office space. Two years ago, Primalbase launched promising a new model for co-working, with customers buying lifetime-membership tokens, paid for using Bitcoins, which they would be able to rent out to others when they didn’t need a desk. Today, all that remains is a website – and the people behind the company are nowhere to be found. Karl Tomusk investigates The views from the lifeless 32nd floor of 1 Ropemaker were breathtaking. A full floor devoted to co-working high above the City – its fridges filled with free drinks but its floors virtually devoid of life – promised loyal users a “workplace revolution”. This was Primalbase London. Users could buy the company’s own cryptocurrency and use it to book hot-desks at any of its offices around the world. In early 2018, as Primalbase plotted its expansion from its base in Amsterdam to the UK, that sounded simple, elegant and futuristic. There was only one problem: that idea would come crashing down as the team behind it quietly slipped away, leaving behind a band of furious, confused investors. When EG visited Primalbase in Amsterdam in February 2018, the concept had captured the zeitgeist. A co-working company using crypto to rent out hot-desks seemed inevitable in the wake of both WeWork’s interminable world domination and the crypto-mania that gripped techies and the general population alike. But the swanky, zen-like Amsterdam office was eerily quiet: the table football untouched, the crocheted swing-seat vacant and the only signs of life appeared to be Primalbase’s own employees silently milling about. Ralph Manheim, then chief executive of Primalbase, assured us there would be more buzz as the company grew. At the time, only token holders – those who had bought one of the 1,000 Primalbase tokens the company issued in its initial coin offering (ICO) – could use the hot-desks, but they would soon launch a leasing system where token holders who didn’t need to use the space could rent out their tokens to others. It would mean having a much larger market. The company’s expansion plan was ambitious: it already had offices in Amsterdam and Berlin, with London and New York set to open later in 2018. But less than two years later, Primalbase has effectively shut down. Its last Instagram post was on 8 October 2019 – a picture of general manager Jan Semotam (who resigned less than three months later) posing with a colleague giving a thumbs-up. All that remains is a website – still promising a “workplace revolution” – that has no way to book space. The company’s base in London is still listed with opening times, despite the landlord’s solicitors issuing a notice of peaceable re-entry on 16 January 2020, and CBRE marketing 13,044 sq ft on the 32nd floor of 1 Ropemaker at the time of writing. Investors were told none of this. What went wrong? Primalbase was funded by an ICO in June 2017, when the company first sold its tokens for a total of 3,100 Bitcoin (about $7.5m at the time). It would use that capital to open offices worldwide. Its revenue would come from niche but established tech companies taking traditional leases. It would also take a 10% fee from users that leased their tokens. By the second half of 2019, it was clear that model wasn’t sustainable. Whispers of trouble passed from user to user, and each concern was met by Primalbase’s brand of passive-aggressive customer service. In September, users started complaining on messaging service Telegram that fridges were empty. Primalbase suggested they weren’t and, when a user shared a photo of a fridge from the Berlin office that had nothing in it but a few bottles of beer, its response was that this was a fridge for storing lunches. Users in Berlin pointed out that the same fridge had been filled with drinks and fruit just two weeks earlier. Within an hour, the team from Berlin replied and said that a food delivery was on the way after “a small delay”. At the end of the message, they added: “You can also come to us directly on the floor to ask instead of posting a photo in this group. We won’t bite!” Issues like this continued, but the real source of frustration for token holders was the leasing system. Originally conceived as an open marketplace where the price was set by demand from customers, the leasing system forced token holders to charge a minimum price of €8 (£6.64) per day from July 2019 onward. The Primalbase team claimed it was to ensure that the price remained competitive, but token holders soon found themselves unable to lease their token because of a lack of demand. By October, some reported not having leased their token in more than 90 days. Meanwhile, the token itself – which users could buy from a few obscure trading sites only, using a prohibitively complex process – had become almost entirely illiquid. People weren’t buying or selling their tokens, and they couldn’t make money leasing them, meaning there was little financial incentive for holding a token any more. The price, which the company claimed would keep rising as more offices opened, had plummeted from a high of nearly $12,000 to about $1,100 – it now hovers at around $40. When one user on a Saturday morning in October raised concerns about the leasing system, asking the team to address it by Monday, one of the community managers responded with a gif of comedian Steve Martin complaining that he had a “serious case of the Mondays” and the team left it at that. The collapse Although users seemed unhappy, there were still those who hadn’t bailed on the company and still used its co-working spaces. Their only reward for staying loyal was frustration. On 4 November, Gavriel Shaw, a Primalbase token holder, was surprised to find he could no longer book a desk at the London office – which wasn’t ideal, given that he was already en route and had video calls scheduled for later in the day. Unsure of whether he would get access to the building, he asked Semotam, the general manager. Semotam’s response was that there was no access that day and that “we’re working on sorting it out”. Shaw asked why there was no access and whether there had been an announcement about the closure. There was no response. At the same time, users in Berlin reported having no internet access the week before. They demanded answers and for days got no response, leading to growing speculation about the future of the company. Finally, on 6 November, Semotam responded: “Guys, I am sorry for the silence over the past couple of days. We’ve been working hard on making sure we can be operational ASAP. There’s no need to panic or speculate about the end, scams or me being ‘visibly in panic’.” He said they hoped to be up and running again by the following week, apologised for the inconvenience and ended with: “Please give us a few more days to crack on and get things sorted. Thanks!” That was the last official message Primalbase sent. Over the following weeks, users found out that the Berlin office had closed when an event scheduled there had to be moved to another location and people were asked to hand in their key cards. Others reported that the Amsterdam office still had users, but no presence from the Primalbase team. Having no official announcements about any of this meant users relied on word-of-mouth updates on whether or not they had a place to work on any given day. On 22 January, Semotam re-emerged, this time on his personal account, and said that he had been out of the loop since resigning in December. “There is no staff employed any more in any of the locations,” he wrote. “Unfortunately, the ICO money had been spent even before I joined in August and there was close to zero revenue stream.” Semotam joined after Ralph Manheim had left owing to disagreements over the future of the company. Both declined to speak. In his message, Semotam continued: “We really did try hard to find new funds, new clients and keep it going. And I am truly sorry we didn’t manage.” Who was behind Primalbase? Primalbase’s existence was a testament to the unregulated, opaque nature of cryptocurrencies. Before Primalbase’s ICO, potential investors raised concerns that they could find few actual names connected to the proposals. What little information there is links back to a web of overlapping names strewn across seemingly defunct companies. On Primalbase’s website, the first testimonial is from a man named Dmitry Faller, who is listed as founder of Research Institute, a company’s whose website is offline and, according to its bare LinkedIn page, is based at Palladium House in London, despite little other evidence of its existence. Faller also happened to be the chairman of Primalbase’s advisory board. In the UK, the only names connected with Primalbase (registered under the name Prembco London) are Manheim, Semotam and James Hadyn Smith. Smith was appointed as a director of seven different companies between January and April 2018. All are either dissolved or have accounts overdue, while four are also linked to Faller, who is a researcher at the Russian Academy of Sciences. One of these companies is Binary District, a blockchain events organisation that still lists its address as the Primalbase office in London, and which hasn’t posted anything since November – the same time Primalbase went quiet. For investors sceptical from the start, Primalbase’s story may come as no surprise. In 2017, one potential investor asked a Primalbase community spokesperson to explain the financial benefits of being a token holder. Being a lifetime member, they claimed, isn’t enough of an upside, considering the risk that leases could expire and companies could go bust. The spokesperson’s response? “That’s not in Primalbase [sic] plans.” What was in those plans, however, remains a mystery. See also: How to pay for an office without using cash and Primalbase’s Ralph Manheim talks about cryptocurrency and co-working   The death of ICOs – a view from the crypto world Mass hysteria propelled cryptocurrencies into the public view in late 2017 and early 2018. Start-ups and established industries alike wanted to cash in on billions of dollars that suddenly flooded new coins and blockchain-based technologies that were decentralised and unregulated.  That didn’t last. “We can now say with enough confidence that blockchain is the story of dumb and delusional copycats of Bitcoin,” one Bitcoin entrepreneur and researcher says. The problem, he says, is that the blockchain industry was an example of “cargo cult science” – the idea of mimicking something that has apparently worked before without taking time to understand how or why it worked. It tried to recreate the decentralisation Bitcoin offered in a host of new ways, which, in hindsight, has not worked. Goldman Sachs and JP Morgan bailed, leaving the R3 blockchain consortium, while Blythe Masters, a former JP Morgan executive, stepped down as chief executive of digital ledger technology firm Digital Asset Holdings. That doesn’t mean there’s no hope for the technology. Bitcoin’s Liquid network also offers the potential for asset tokenisation – but, given that it launched less than 18 months ago, it’s still too experimental to draw in much corporate interest.