2 (DeFi) projects are butting heads over a governance proposition that could see the recovery of 40 Ethereum (ETH) stolen in Sushiswap’s April hack.
Tensions betwixt two trending decentralized financial (DeFi) projects have reached a breaking point as cryptocurrency exchange Sushiswap and Ethereum (ETH) staking protocol Lido await the result of a contentious vote to return stolen cryptocurrency to Sushiswap.
It’s a situation involving a multi- Million dollar hack, a cryptocurrency Twitter battle and weeks of decentralized governance theater. Decentralized Finance projects have long faced mainstream skepticism owing to the prevalence of hacks and the shoddy decision-making of the decentralized organizations that operate them.
Both issues were on full display in recent weeks as Sushiswap began an attempt to recover funds it lost in a $3.3 Million hack, only to get thwarted by the tricky politics of Lido’s governing body, LidoDAO. A Second attempt is ongoing, but looks to be headed toward defeat.
Read More: Sushi DEX Approval Contract Exploited for $3.3M
Sushi recovery effort
Owing to the nature of Sushiswap’s April exploit, the bulk of stolen funds were directed to a Lido vault contract that automatically distributed it to Lido stakers and node operators. No one’s attempting to claw that money back, but the 40 Ethereum (ETH) (~$72,000) that landed in Lido’s treasury seems to be the most easily recoverable. It’s this chunk Sushiswap wants returned.
As a show of support for Sushiswap’s recovery effort, LidoDAO put forth a governance proposal on May 4 to vote on whether or not to return the 40 Ethereum (ETH) from the LidoDAO treasury to Sushiswap.
The vote saw the bulk of Lido crypto token holders cast votes in favor of returning the funds, but the vote fetched only 44 Million votes, shy of the 50 Million votes required to reach quorum.
On May 18, LidoDAO put forth a Second governance proposal on whether or not to return the funds. The proposal’s voting period closes Thursday, May 25.
Up to now, the new vote has seen even less participation – and the bulk of voters flipping to ‘no action’ – stoking tensions betwixt the two projects as the prospect of the funds getting returned appear dimmer.
‘Code is law’ or theft?
Following the failure of the 1st vote, Sushiswap’s Head Chef Jared Grey took to Twitter to call Lido’s actions “theft.”
“ Unfortunately, as we’ve worked with the Lido team to find a way forward to return the stolen funds they’ve disbursed, plenty of personalities have made the argument Lido has no duty or authority to return them, essentially greenlighting the distribution of stolen funds to numerous Lido DAO participants,” tweeted Grey.
Grey likewise accused Lido advisor and pseudonymous Decentralized Finance user Hasu of leveraging DAO procedures “to obfuscate and impede” the procedure of returning the funds.
Nonetheless, the Lido camp reveals Grey is as well quick to cast blame.
“ A lot of us feel we’ve done everything we can to assist them in the face of legal threats to fellow contributors, under a situation where they’ve made a series of careless and sloppy mistakes,” stated a Lido contributor who requested not to be named. “For them to take such a disingenuous and pointed stance on Twitter platform like this is really disappointing to see.”
The Lido contributor alleged that Sushiswap didn’t properly audit the smart contract that was following that exploited and that Grey used misleading language to imply that Lido’s treasury received considerably more Ethereum (ETH) than it did. Grey did not instantly respond to a request for comment.
Another twist in the saga revealed that the hacked wallet in the Sushi exploit is Ethereum (ETH) address sifuvision.eth, belonging to a fund run by pseudonymous cryptocurrency personality 0xSifu. 0xSifu was the treasurer of failed Decentralized Finance project Wonderland and was thereafter revealed to be a previous executive of the Canadian cryptocurrency exchange Quadriga, which collapsed in epic fashion in 2019.
Both projects have faced regulatory woes in the year, with Sushiswap revealing they were subpoenaed by the Securities and Exchange Commission (SEC) in March. LidoDAO, the decentralized autonomous organization behind the Lido staking protocol, was rumored to have received a Wells Notice by the same agency in March, which a spokesperson for Lido at the time declined to confirm or deny.