What Happened: From Paper Millionaire to Zero
On November 8, 2025, crypto influencer IcoBeast took to X with a post that would soon haunt him.
After securing a substantial allocation in MegaETH’s initial coin offering by committing to a one-year lock-up, he proudly announced his tokens were worth nearly $1 million at pre-market prices. More tellingly, he openly discussed his plans to hedge this position, mentioning he’d likely get “one of the big desks to write me a put at 40c” expiring in January 2027.
The post didn’t age well.
Within two days, MegaETH contributor Namik Muduroglu clarified that all sale participants who locked tokens for a year had explicitly agreed not to pursue resale, transfer, or hedging activities. Those publicly planning to hedge would “receive a refund and zero allocation.” IcoBeast’s allocation was swiftly revoked, and his paper wealth evaporated overnight.
The drama escalated when prominent crypto commentator Cobie weighed in, pointing out the inherent contradiction: “Pretty wild to call airdrop farmers low value and then publicly signal your intention to dump everything/buy puts before you have even received your tokens.” His observation struck a nerve because it exposed a familiar hypocrisy in crypto culture—everyone hates VC behavior until they get the chance to act like VCs themselves.
But then the plot thickened. Blockchain detective ZachXBT revealed that Kook, a notorious scammer with a well-documented history of fraud, had received a maximum allocation. This revelation pushed the debate into overdrive. If someone openly discussing hedging gets blacklisted, shouldn’t an established scammer be disqualified even more decisively? The MegaETH team responded through HotpotDAO, explaining that Kook’s allocation resulted from high algorithmic scores across various on-chain metrics, not favoritism. They even noted that IcoBeast had closer personal ties to Bread, MegaETH’s marketing lead, yet still lost his allocation—supposedly proving the system’s impartiality.
The sale itself was massively oversubscribed at 28 times, raising approximately $50 million with nearly 15,000 participants competing for allocations. This overwhelming demand gave MegaETH considerable leverage in choosing who would receive tokens.
Why MegaETH’s Approach Actually Makes Sense
At first glance, MegaETH’s actions seem to contradict everything Web3 stands for.
Isn’t crypto supposed to be permissionless and censorship-resistant? Yet, this perspective misses a crucial distinction between organizational centralization and value-based consensus.
The philosophical tension here runs deep.
Pure decentralization, where every participant has equal access regardless of intention, often leads to a tragedy of the commons. When projects distribute tokens indiscriminately, short-term speculators typically outnumber genuine believers. The result is predictable: launch day becomes a race to exit, destroying value for everyone who stays.
We’ve seen this pattern repeat itself countless times across DeFi airdrops and fair launches.
MegaETH’s approach represents an attempt to break this cycle by filtering for conviction before token distribution.
What’s crucial here is that this filtering operates within the framework of voluntary participation and transparent rules.
Nobody forced anyone to participate in the sale, and the terms were clear from the outset: one-year lock-up means no hedging, no OTC deals, no circumventing the spirit of long-term alignment. IcoBeast signed up knowing these conditions, then publicly violated them. His allocation revocation wasn’t arbitrary censorship—it was contract enforcement, plain and simple.
This distinction matters enormously.
Decentralization doesn’t mean anarchism or the absence of rules. It means algorithmic governance and transparent enforcement of agreed-upon standards. Consider Bitcoin’s early community, often held up as the gold standard of organic growth. That community was similarly self-selecting. Only true believers mined BTC when it was worthless, and that shared conviction created the strongest consensus in crypto history. Ethereum’s community formed around shared technical values and philosophical commitments, not just profit motives. Why should MegaETH be any different?
Where the Real Controversy Lies
That said, supporting MegaETH’s right to enforce standards doesn’t mean endorsing their execution without scrutiny.
Here’s where I think the debate has gone off track. The question shouldn’t be whether projects can filter participants—of course they can, especially when demand exceeds supply by 28 times.
Instead, the crucial question is whether the filtering criteria are fair, transparent, and consistently applied.
The IcoBeast case seems straightforward enough. He publicly announced his intention to violate the terms, leaving little room for interpretation. But the Kook situation? That muddies the waters considerably. If the allocation system truly operates on algorithmic scoring of on-chain activity and social engagement, then a known scammer scoring highly suggests either the algorithm is gameable or it’s measuring the wrong things. Neither possibility inspires confidence.
Moreover, several community members with genuine testnet participation and Fluffle NFT holdings reported receiving minimal allocations despite significant engagement. Content creator TylerD called the process “misleading,” noting that wallets with substantial on-chain history and early MegaETH activity sometimes received the same allocation as fresh wallets.
This raises uncomfortable questions about whether the scoring system actually captures genuine conviction versus sophisticated gaming.
What MegaETH Needs to Do Next
To maintain credibility and truly balance decentralization with community curation, MegaETH needs to prioritize transparency in several key areas.
First, publish the complete scoring algorithm with specific parameter weights. If on-chain activity matters, specify which contracts and what timeframes. If social signals count, clarify which platforms and engagement types. The community should be able to understand exactly why one wallet scored higher than another. This doesn’t mean revealing individual scores publicly, but the methodology itself must be verifiable.
Second, implement an appeals process with clear criteria. Mistakes happen in any algorithmic system, and legitimate participants deserve a chance to contest erroneous classifications. This process should include human review for edge cases while maintaining the core principle of rules-based allocation.
Third, address the elephant in the room by developing better mechanisms for identifying bad actors beyond simple on-chain metrics. Kook’s case demonstrates that transaction volume and social activity can be manufactured. Perhaps incorporating reputation systems from established crypto communities or requiring vouching from verified builders would add another layer of authenticity verification.
Finally, maintain absolute consistency in enforcement. If hedging intentions disqualify participants, this standard must apply universally regardless of follower count or personal relationships. The moment favoritism enters the equation, the entire framework collapses into the centralized gatekeeping MegaETH claims to oppose.
The Bigger Picture
Looking at this from a broader perspective, the crypto industry stands at a crossroads between two failed models: VC-dominated launches that privatize gains while socializing losses, and indiscriminate airdrops that reward mercenaries over builders. MegaETH’s experiment with conviction-based allocation represents a genuine attempt at finding middle ground, and honestly, I think the industry needs more projects willing to take this risk.
The community isn’t wrong to demand accountability—that scrutiny is precisely what separates voluntary collective action from authoritarian control. But let’s be clear about what we’re scrutinizing. The principle of filtering for long-term believers isn’t the problem. The execution and transparency of that filtering is where MegaETH will either prove its innovation or reveal itself as just another gatekeeper wearing decentralization as a costume.
Whether this experiment succeeds will depend not on the principle of filtering itself, but on whether the filters prove fair, transparent, and resistant to gaming. MegaETH has set a precedent that many projects will likely follow. For the sake of the entire industry, they’d better get it right.