Compound Finance is facing backlash after passing a contentious proposal that assigns $24 million worth of COMP tokens to a new vault. The proposal, known as Proposal 289, narrowly passed on July 28, 2024, with a slim 51% approval rate, provoking concerns about DAO governance integrity.
Proposal 289, advanced by a group called the “Golden Boys” and led by a COMP token holder known as “Humpy,” involves moving 499,000 COMP tokens to a vault designed to generate yield for long-term holders. The vault issues a wrapped token called goldCOMP, which supposedly offers a passive income stream.
However, the proposal’s approval has been criticized as a potential “governance attack.” Michael Lewellen, a security expert at OpenZeppelin, had previously flagged concerns about the proposal’s lack of prior discussion and the anonymous nature of its delegate. Critics argue that the Golden Boys’ acquisition of voting power through market purchases undermines decentralized governance principles, making decisions reflect the interests of a few rather than the wider community.
Omer Goldberg from Chaos Labs described the proposal as “poorly communicated” and possibly an overt attack on the DAO. This isn’t Humpy’s first controversy; he was involved in similar contentious actions with the Balancer protocol in 2022 and attempted a governance attack on SushiSwap earlier in 2024.
The proposal’s passage led to a nearly 7% drop in COMP’s price, reflecting market skepticism. Humpy defended the proposal by denying any intention to misappropriate funds, asserting that the investment would be managed through a Trust Setup with specific constraints. Nonetheless, doubts persist about the Golden Boys’ control over the vault, as Wintermute’s governance account highlighted that withdrawal actions are controlled by the Golden Boys’ multisig, leaving the DAO unable to recall funds at will.
