Did CNN just rob their NFT store?

Rye move, verb: “pulling the rug out from under someone,” who dramatically upset the status quo.

Rug pull, noun (crypto): A crypto-based fraud scheme where project founders convince users to invest their money in a crypto or NFT project which they then abandon, likely absconding with all the invested funds.

On Monday, many users of CNN’s “Vault” NFT store dropped the dreaded “r-word” when the company announced it was closing its non-fungible token store after almost a year of activity. Although the company has told users on its Discord that it plans to compensate them for some of the funds for “thousands” of users with even more cryptocurrency, now comes the question, did a major news network just backstab?

In a Monday Twitter post, CNN described how “Vault originally launched as a 6-week experiment, but the support and engagement of our community allowed us to grow this project into something much bigger…we learned a lot from our first foray into Web3, and we are excited to bring Vault’s concepts around community storytelling into future projects.” Of course, the network didn’t give a specific reason why they closed shop. NFT may actually be a dirty word at this point. Recent data shows that NFT trading volume has fell 97% from the height last year.

When it was originally created, CNN did not mention an expiration date, so the message that it lasted much longer than expected is especially hollow. The original press release for Vault mentioned the initial launch included six weekly NFT drops, but the release built up hype for future drops to include “an even wider variety of digital collectibles and formats.” Well, at least their NFT platform lasted much, much longer than the company’s ill-fated attempt at a streaming service with CNN+, which lasted just under three weeks. Vault, which was released in June 2021allowed users to take a copy of “defining moments” imprinted on the Flow blockchain, whether it was a presidential election or major space rocket launches.

Some users were worried that they might lose access to their NFTs, although the company tried to calm users’ fears. Jason, who is listed as a CNN employee, told Discord users that Vault’s NFTs are stored on IPFS, a peer-to-peer filing system. They are not planning any more drops and Jason mentioned that compensation would be either FLOW tokens or stablecoins inserted into each collector’s wallet. Here’s the kicker, that “distribution” will only be about 20% of the original coin price of each Vault NFT in a user’s wallet.

Gizmodo reached out to CNN with questions regarding many of its users’ main complaints, as well as questions about how much CNN has made from its NFT auctions. We didn’t hear back immediately, but we’ll update the story if we receive additional comments. Decrypt estimated that CNN likely made hundreds of thousands in profit on its first sold-out NFT auctions.

Although the actual marketplace would remain active, users were quick to mention that the value of these NFTs would quickly plummet without an active community and little actual utility. Other users mentioned that there were glaring holes in CNN’s plan to abandon the project. As pointed out by The Verge, Flow blockchain limits stablecoin withdrawals to $10 per transaction and with a gas fee of $4. Depending on what kind of NFT a user has in their wallet, withdrawing that stablecoin may not even cover the price for users trying to withdraw that crypto from their wallet.

Although Vault users weren’t exactly thrilled with the news that their tokens would suddenly lose most of their value without direct support from the company. Others asked why CNN thought 20% compensation was fair if users were unlikely to break even on their investment for many years. Some Vault users predicted that the Art of Voting NFT series would drop to midway on November 8th, but that will no longer happen. Users mentioned that the company had promised new features and crashes so recently like last month.

Knowing that CNN has probably made a lot more than they’re giving out to current users, this may be the closest a major company can get to what people traditionally think of as a rye draft. There are still new NFT projects coming out the door, but in many cases these companies would rather avoid the designation non-exchangeable token. Starbucks launches its “digital collectible stamps” as Reddit launches a series of blockchain-based “Collectable avatars.”