Compound Conundrum: Governance Attack Allegations Shake Compound Finance

A controversial proposal to allocate $24 million of Compound Finance’s treasury has sparked allegations of a governance attack by a small group of token holders, raising concerns over the protocol’s decision-making integrity. 

Proposal 289 Controversy

A recent proposal passed by the decentralized lending protocol, Compound Finance, has raised concerns about a potential governance attack. Community members allege that a small group managed to push through the proposal by amassing large numbers of tokens on the open market.

The contentious issue revolves around Proposal 289, which involves allocating 5% of Compound’s treasury, approximately 499,000 COMP tokens valued at $24 million, to a yield-bearing protocol designed by a group known as the “Golden Boys” for one year. Voting for this proposal commenced on Thursday at 11:40 p.m. and concluded over the weekend. By July 28, the proposal had narrowly passed with a vote tally of 682,191 in favor and 633,636 against.

Allegations of a Governance Attack

However, community members have voiced their concerns, suggesting that the Golden Boys conducted a governance attack. 

Michael Lewellen, a security solutions architect at OpenZeppelin and security advisor for Compound Finance, highlighted suspicious activities involving several accounts acquiring COMP tokens and proposing to divert COMP holdings towards the Golden Boys’ goldCOMP product. 

Lewellen expressed his concerns on the Compound governance message board, stating, 

“In my personal opinion, the actions of @Humpy and the Golden Boys can be considered a governance attack if they persist in their attempts to take funds from the protocol in clear opposition to the will of all other Compound DAO delegates.”

Defense and Dispute

Following the approval of Proposal 289, Humpy, the apparent leader of the Golden Boys defended the proposal against Lewellen’s accusations. He stated, 

“‘Steal funds’ is a wrongful and misleading phrase, especially coming from the Compound’s risk specialist. Requested investment goes through a Trust Setup with a constraint set of actions that don’t permit stealing/diverting of funds.”

However, there appears to be internal discord within the Golden Boys. At least one of the multisig members, Ogle, claimed to be unaware of the proposal, claiming that despite being a part of the multisig for quite some time, they were not aware of the vote and had not participated in it. 

Concerns Over Trust Setup

Wintermute, a governance account within Compound, previously questioned the efficacy of the ‘Trust Setup’ in preventing the diversion of funds. They pointed out the potential flaw in all withdrawal actions being solely controlled by the GoldenBoyzMultisig. Because of this, the DAO will not be able to recall funds at their own discretion. Instead, it would have to vote to initiate a PHASE update and depend on the multisig to recall the relevant divestment. 

Thus, the passing of Proposal 289 has sparked significant controversy within the Compound Finance community, with accusations of a governance attack by the Golden Boys. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.