When Founders Exit: Story Protocol's Jason Zhao Steps Down Amid Community's "Soft Rug Pull" Memes and Revenue Reality Check

The crypto space is crying in meme mode after Story Protocol co-founder Jason Zhao announced his departure from the $2 billion on-chain intellectual property platform. On August 16, the news triggered widespread speculation about whether this constitutes a “soft rug pull”—especially given the project’s eye-watering revenue figures.

The Numbers Tell a Story

Let’s cut to the chase: Story Protocol raised $134.3 million across multiple funding rounds, with headline act a16z crypto investing $80 million in a Series B round during August 2024. The company’s valuation? A hefty $2.25 billion. Yet the protocol generated just $45 in daily fees according to recent data, with DeFiLlama showing an all-time revenue high of $3,163.

For context, Harmonix Finance (built on Hyperliquid) generates approximately $3 million in daily revenue and didn’t raise a single dollar. Its founder and core team have no prestigious VC backing. The contrast sparked heated discussions in developer circles about capital allocation and actual product-market fit.

What Zhao’s Exit Really Means

Zhao’s departure to focus on Poseidon—an AI infrastructure layer for biopharma and space research—sent shockwaves through the community. Here’s what makes this significant: according to Story Protocol’s token distribution, Zhao and three co-founders collectively hold 20% of the one billion token supply. If Zhao controls approximately 5% and the token trades at $5.69, his potential liquidation could yield around $284.5 million—assuming full exit.

The timing raised eyebrows. One prominent developer pointed out that despite securing over $130M in funding “from elite VCs,” the protocol failed to deliver meaningful utility. “The blockchain produced just $45 in fees during the past 24 hours despite claims of tokenizing $61T in IP,” they stated.

Red Flags in the IP Treasury Plan

Additional scrutiny emerged after Story Protocol secured an $82 million token investment from Heritage Distilling in August, framed as part of a $360 million IP token reserve initiative. Joseph Schiarizzi, founder of lending protocol Nerite, raised concerns about the execution: the team sold $150,000 worth of tokens to boost the IP token’s price by merely 2%, yet claimed readiness to manage a $300 million treasury.

“An elaborate plan to dump on retail,” Schiarizzi characterized it—sparking the community’s broader meme-worthy “soft rug pull” narrative.

The Second Chapter

Despite the drama, Story Protocol isn’t technically shutting down. Leadership transitions to S.Y. Lee and new Chief Product Officer Andrea (formerly of Amazon’s conversational AI division). Zhao reflected on his tenure as “the most meaningful experience,” noting that the protocol now counts Balmain and BTS among its clients, processing millions of transactions.

But here’s what sticks: when a founder exits after massive capital raises, when revenue barely registers on a blockchain designed to “revolutionize IP,” and when token mechanics appear questionable—the community’s skepticism becomes a feature, not a bug. The Story Protocol saga is less about malice and more about the gap between venture narratives and on-chain reality that continues to define crypto’s growth phase.