Compound, an Ethereum-based cryptocurrency money lending platform mistakenly sent out $90 million to several of its users. Now, the founder is openly threatening the receivers to return the money or face the IRS.
Decentralized Finance (DeFi) platform Compound accidentally dolled out Ethereum assets worth $90 million to its users. The platform’s internal accounting system is well aware of the accounts where the tokens went but the founder is coercing them to return the accidental windfall.
Cryptocurrency platform accidentally sends out $90 Mn. then threatens recipients of the funds to return them:
Compound is a popular cryptocurrency platform that has a slightly different business practice. It doesn’t necessarily trade cryptocurrencies but serves as a bank.
Compound is an Ethereum-based money market protocol. The platform enables users to earn interest or borrow assets against collateral.
How the tiniest of errors resulted in an $80 million loss for Compound Finance #ethereum #crypto https://t.co/wYxh6BPCh8
— Ethereum Insider (@InsiderEthereum) October 1, 2021
Lenders with Ethereum tokens can provide assets to Compound’s liquidity pool and start earning compounding interest. Interestingly, the platform does not set interest rates. Instead, supply and demand for the Blockchain-based digital currency decide interest rates.
Mistakes and thefts are common in any banking system, be it fiat-based or cryptocurrency-based. The Compound platform too suffered from a rather expensive glitch.
Today some Compound users noticed that they could claim far more COMP that they were rightly due, causing the protocol to lose millions that should have been reward to users over a long period of time.
I will attempt to explain what we know so far.https://t.co/YTZ7MYFZFW
— TheNFTBillboard 🦇🔊 (@TheNFTBillboard) September 30, 2021
Reports indicate a botched-up upgrade process caused the platform to send out tokens worth $90 million to its users. The platform did not accidentally spill out virtual moneybags.
Simply put, the Compound is well aware of the exact whereabouts of each and every token it mistakenly paid out. The platform obviously keeps a detailed transaction history.
If you received a large, incorrect amount of COMP from the Compound protocol error:
Please return it to the Compound Timelock (0x6d903f6003cca6255D85CcA4D3B5E5146dC33925). Keep 10% as a white-hat.
Otherwise, it's being reported as income to the IRS, and most of you are doxxed.
— Robert Leshner (@rleshner) October 1, 2021
Shortly after realizing the expensive but reversible blunder, Compound’s founder Robert Leshner urged users to return the assets to the platform’s Timelock contract.
However, the choice of words is quite concerning. As evident from the Tweet above, Leshner essentially threatened Compound’s users.
Why is Compound threatening its users to return the tokens?
Compound’s Robert Leshner did attempt to coerce the recipients of the windfall to return the assets. However, he did offer 10 percent of the assets as a gift for the “white hat” behavior. He seemed to be indicating that do-gooders with high standards of ethics could keep 10 percent of the accidentally received bonus as a token of Compound’s appreciation.
Wow @compoundfinance this is just embarrassing – a plea wrapped in a threat, fueled by the lack of privacy. https://t.co/iqkhRDF76Z
— Assaf Morami (@assafmo) October 1, 2021
Needless to add, Leshner caused quite a stir on social media platforms. Many criticized the lack of professionalism and even hinted that several users who wished to return the money might just choose to keep the same.
This is how to make people who would marginally be willing to help you out for your mistake keep it out of spite. https://t.co/8QuFoS2miG
— Ryan Lackey (@octal) October 1, 2021
Even the cryptocurrency trading index seemed to reflect the common angst against Compound. Following the blunder and the founder’s tweet, the value of Compound’s native token fell.
According to the market, COMP dropped by around 13 percent but is steadily recovering. Obviously realizing the Tweet did not have the best choice of words, the platform’s founder then sent out another Tweet.
I'm trying to do anything I can to help the community get some of its COMP back, and this was a bone-headed tweet / approach. That's on me.
Luckily, the community is much bigger, and smarter, than just me.
I appreciate your ridicule and support.
— Robert Leshner (@rleshner) October 1, 2021
Leshner insists that Compound is not the one to suffer. He added that the incident will not impact user funds, supplied assets, borrowed assets, and positions.
All supplied assets, borrowed assets, and positions are completely unaffected. Users don't have to worry about their funds; the only risk is that you (or another user) receives an unfairly large quantity of COMP.
— Robert Leshner (@rleshner) September 30, 2021
It is interesting to note is that the Compound protocol requires a seven-day governance process. What this basically means is that the platform must wait for a week to initiate any action. The platform’s founder is clearly hopeful that its users will return the accidentally transferred assets.