Premier League clubs come under pressure to drop crypto fan tokens firm Socios

Premier League clubs are reviewing their multi-million pound relationship with fans’ token firm Socios after an investigation raised serious questions about its business practices.

Arsenal told The Mail on Sunday that they had approached Socios and parent company Chiliz for more details on the allegations around its chief executive Alexandre Dreyfus and the supposed non-payment of staff.

Supporters groups, meanwhile, have said the report highlights how leading sides have been too quick to enter partnerships with crypto-based companies.

The investigation by the Off The Pitch website found that Dreyfus, a French internet entrepreneur, had advised against paying high-profile individuals to protect the value of his firm’s cryptocurrency.

Staff also claimed to go unpaid until they informed Off The Pitch that they were prepared to take legal action against the Malta-based company. 

Premier League clubs are reviewing their lucrative relationship with fan tokens firm Socios

Arsenal are one of six Premier League clubs who have partnered with Socios along with Aston Villa, Crystal Palace, Everton, Leeds United and Manchester City.

Socios is a blockchain-based platform on which fans can buy virtual tokens allowing them to engage with the club and potentially vote on minor decisions relating to it. The Socios app uses Chiliz’s eponymous cryptocurrency for transactions.

The company’s rapid expansion – Socios boasts of 120 global sports partners in total, including Uefa and other clubs such as Barcelona, Juventus and Paris St-Germain – has drawn criticism from supporters’ groups concerned by the industry’s lack of regulation. 

Giants Arsenal are one of six top-flight teams who have formed a partnership with Socios

Fans’ tokens can also fluctuate in valuation, potentially losing supporters money.

‘We are speaking with Socios to understand more about the allegations,’ an Arsenal spokesperson said, while insisting that the club had properly vetted Socios and Dreyfus. ‘We always carry out due diligence through independent specialists before we enter any partnership.

‘We are not promoting fan tokens as a financial investment, and we are clear it’s about engaging with the club by taking part in polls and competitions. However, we make people aware there are financial risks if they choose to invest.’

Four Socios ‘advisors’ working in Korea, including a high-profile tech executive, told Off The Pitch initially that they had not been paid what Dreyfus owed them in the cryptocurrency. Some of the advisors had appeared at events promoting his brand.

Discussing their situation via an internal Slack channel, Dreyfus told colleagues that distributing the currency would deflate its value. He was also dismissive of the advisors’ complaints, writing: ‘They don’t have hard feelings. This is FREE money.

‘With or without them, we will work… [The advisor] is a business guy, it will never be an issue.

‘Gamers, we don’t care. They don’t understand business, even if they are celebs,’ he added. Gamers were among the influencers signed up to promote Socios, which took its name from the Spanish word for supporters who hold an official role in the running of a club such as Barca.

Dreyfus went on: ‘We also need to protect protestors who put money [sic]. When you give free tokens, people can sell at anyprice [sic]. It doesn’t matter for them; so it makes the price going down… and the REAL investors who bought are losing money bceause [sic] of that.’

Arsenal announced they would launch the $AFC Fan Token to move into cryptocurrency

A Chiliz spokesman strongly denied that Dreyfus was implying that the company wanted to control the value of the cryptocurrency. The spokesman said the amount of money involved was not big enough to affect the Chiliz’s price. 

‘With 3.7bn CHZ [Chiliz] in circulation in January 2020, the allocation for advisers in Korea represented less than 0.3%,’ the spokesperson said. ‘Clearly the awarding of any of this CHZ allocation to advisers could not impact on the price. With 6bn CHZ in circulation today, like other currencies and cryptocurrencies its price is driven by prevailing market conditions, not the timing of any ongoing reward schemes for eligible employees and advisers.

‘We regret that some advisers that worked with us in the past in Korea were not given their token allocations in a timely manner. We have since rectified this.’

The advisors were paid shortly after Socios management established that they were in contact with Off The Pitch.

Socios staff were also due to be paid in Chiliz but initially went unpaid until the terms of their contract were rewritten, leaving them with less money than they would have earnt had they cashed in their currency sooner.

The club’s token, as a result of a partnership with Chilliz, was launched on the Socios.com app 

Francesco Lucia, Chiliz’s ‘head of people’, confirmed staff contracts were restructured in an audio recording obtained by the investigative team.

‘When it comes to the Chiliz allocation, yes, there was an initial contract that however was substituted by the new policy because of business needs.’ he said.

The Football Supporters’ Association said the investigation highlighted the need for Premier League clubs to vet potential commercial partners in the crypto industry.

‘Ever since their emergence in English football, supporters have raised concerns about crypto-backed tradeable fan tokens,’ a FSA spokesperson said. ‘Clubs have been all too quick to enter into partnerships which seek to monetise fan engagement – promoting products that are misleading and often trivialise the nature of crypto-investments.

‘We reiterate that clubs have a responsibility to vet their commercial partners and consider carefully what they market to their supporters, especially in an area where there are serious questions about the lack of regulatory oversight.’