Compound Finance, a blockchain-based protocol, is under intense scrutiny following the narrow approval of Proposal 289. The proposal, which passed by a vote of 682,191 to 633,636, allocates 499,000 COMP tokens—valued at around $24 million—from the protocol’s treasury to a yield-bearing protocol created by a group known as the “Golden Boys” for a year.
Accusations of Governance Attack
The approval of this proposal has led to accusations of a governance attack, with critics alleging that a small group manipulated the voting process by acquiring large amounts of COMP tokens on the open market. Michael Lewellen, a security advisor for Compound, noted connections between these token acquisitions and the Golden Boys’ proposals.
Community Concerns and Reactions
Several community members, including Wintermute Governance, Columbia Blockchain, Penn Blockchain, and StableLab, have voiced their concerns. They question whether the “Trust Setup” for the investment truly prevents fund diversion, as claimed by Humpy, the apparent leader of the Golden Boys. Humpy defended the proposal, asserting that the “Trust Setup” includes safeguards against misappropriation of funds. However, Wintermute’s governance account pointed out that any withdrawal actions would be controlled by the Golden Boys’ multisig, not by Compound DAO itself.
Internal Criticism and Token Price Impact
Bryan Colligan, CEO of Compound’s growth team, criticized the proposal, suggesting that better investment opportunities with higher returns are available. The controversy surrounding the proposal has also impacted the price of COMP tokens, which dropped nearly 7% following its passage.
Humpy’s involvement in similar controversies with other protocols, including Balancer and SushiSwap, has added to the community’s concerns. In previous incidents, Humpy was accused of exploiting governance processes for personal gain, a pattern that appears to be repeating with Compound Finance.
As the debate continues, the future of Compound’s governance and the integrity of its processes remain in question. The controversy surrounding Proposal 289 has highlighted the vulnerabilities in the protocol’s governance system, prompting calls for increased transparency and safeguards to prevent future governance attacks.
