Compound Finance Faces Backlash Over $24 Million Treasury Allocation to GoldCOMP Vault
Impact on COMP Token and Investor Reaction
According to data from CryptoSlate, the allocation has negatively impacted the COMP token, which saw a decline of about 5% in the past 24 hours, now trading below $50. Furthermore, DeFillama reports a significant withdrawal of assets from the protocol, with its total value locked (TVL) decreasing by over 2%, currently standing at $3.15 billion. This reduction is notably the largest among the top 20 DeFi protocols within the same timeframe.
Chronology of the Controversial Proposal
The approval of Proposal 289 by the Compound Finance DAO, which governs the crypto lending protocol, marks the culmination of a nearly three-month-long process. Initially, in May, a group known as the “Golden Boys,” led by an entity named Humpy, proposed investing 92,000 COMP tokens in goldCOMP’s DeFi vault for a 5% annual return under Proposal 247. This proposal was ultimately rejected due to concerns about future actions of the multi-sig and the absence of adequate safeguards.
Undeterred, the Golden Boys revised their proposal and introduced Proposal 279 with a Trust Setup to address the governance and oversight issues. However, this too failed to pass. Persistence led to the approval of Proposal 289, which not only increased the COMP allocation to 499,000 tokens but also incorporated the TrustSetup and updated the PHASE to allow the Golden Boys’ multi-sig call to invest in the TrustSetup contract.
Community and Expert Reactions
Eskender Abebe, head of product and strategy at Ethereum Name Service, highlighted the risks posed by Humpy’s substantial COMP portfolio. He noted, “Assuming they can direct the 600k tokens that voted FOR the proposal, and the additional 500k they received from the proposal, Humpy and the Golden Boys are now the number one Compound delegate, 4x larger than the [number] 2 delegate a16z and larger than the next 9 delegates combined!”
Moreover, there are concerns about Humpy’s previous engagements with other protocols such as Balancer, where similar tactics were employed. Jared Grey, Head of SushiSwap, has previously accused Humpy of manipulating the governance process to benefit his interests, particularly in relation to the struggling GOLD token.
For more insights into the evolving landscape of DeFi governance, visit our detailed analysis on DeFi trends.
