Governance Concerns Arise Over Compound Finance Proposal 289

A recent proposal passed by lending protocol Compound Finance has sparked accusations of a governance attack. Community members allege that a small group manipulated the approval process after purchasing large numbers of tokens on the market.

Proposal Details

Proposal 289 allocates 5% of Compound’s treasury—499,000 COMP tokens worth $24 million—to a yield-bearing protocol created by a group known as the “Golden Boys” for one year. The proposal narrowly passed with 682,191 votes to 633,636. Voting commenced on Thursday at 11:40 pm and continued through the weekend.

Allegations and Responses

Michael Lewellen, a security advisor for Compound, linked various accounts that gathered COMP tokens to ongoing attempts to redirect these holdings towards the goldCOMP product. A collective of community members, including Wintermute Governance and Columbia Blockchain, echoed these concerns, especially after the Golden Boys made further attempts to push their agenda.

Lewellen stated, “In my personal opinion, the actions of @Humpy and the Golden Boys can be considered a governance attack” if they continue to act against the will of Compound DAO delegates.

However, Humpy defended the proposal, claiming that the term “steal funds” is misleading. He argued that the investment would go through a Trust Setup that prevents fund diversion. However, Wintermute’s governance account questioned whether this Trust Setup genuinely offered the intended safeguards, stating that any withdrawal would be controlled solely by a multisig.

Alternative PRO Opportunities

Bryan Colligan, founder and CEO of Compound’s growth team, noted that there are better profit opportunities available than the proposed investment, with potential APRs reaching as high as 40%.

Mixed Sentiments Within Golden Boys

While Humpy is a key figure in the Golden Boys, at least one member, Ogle, claimed unawareness of the proposal. Ogle, a multisig member, suggested that the group’s intentions are not malicious but rather aimed at mutual benefit.

Price Impact

Following the proposal’s passage, Compound’s token price fell nearly 7% in the past 24 hours.

History of Governance Controversies

Humpy has a history of governance issues, particularly within the Balancer DeFi protocol from April to December 2022. He reportedly used multiple wallets to control over 50% of vote shares, passing proposals unilaterally.

In March 2023, Humpy was also accused of making governance attacks on SushiSwap by its ‘Head Chef’ Jared Grey. Grey voiced concerns over Humpy’s actions regarding the implications for Compound, claiming he feels sympathy for the protocol.

Conclusion

The unfolding scenario reflects ongoing tensions within decentralized governance structures, highlighting the challenges of maintaining equitable power dynamics within DAOs.