Now, after the Aragon Association decided without consulting the DAO to dissolve itself and wind down the project's governance tokens (while keeping some of the funds), the DAO has voted to sue the group. The DAO has accused the group of improperly taking investors' money to put it "into their new secretive company". They've allocated $300,000 to legal efforts.
Aragon DAO votes to sue its founding team
Aragon is a prominent project that creates DAO infrastructure. Ironically, its own DAO-based governance has been fraught, with the group facing a governance crisis in May over conflicts between the DAO and the Aragon Association (a small group of "stewards" for the project).
- "A DAO is funding a lawsuit against its own founding team", The Block [archive]
- "Aragon DAO votes to fund legal action against its founders", CoinTelegraph [archive]
- Proposal to sue the Aragon Association
Superdao to shut down
Superdao, a project aiming to assist communities in forming DAOs, has announced it will be closing its doors. It was blunt in its announcement: "it became clear that the crypto industry itself becomes much smaller than its initial ambition ('the new internet') and specialized tools for crypto companies are unlikely to produce venture-scale outcomes."
The project had raised $10.5 million in a 2021 seed funding round, and has said they intend to return remaining funds to its investors.
- "Superdao is closing down", Superdao blog [archive]
- "DAO-Builder SuperDao Shuts Shop, Returns Investor Money", CoinDesk [archive]
Nouns DAO fractures in $27 million split
Nouns DAO, one of the most prominent Ethereum DAOs, has split into two projects after holders of around 56% of the Nouns NFTs in circulation voted to "ragequit". This means that they have forked into a new DAO, taking 16,757 ETH (~$27.3 million) of the original DAO's treasury with them.
Nouns NFTs have been popular since the project's launch in 2021, and in mid-2022 enjoyed a floor price of over 100 ETH (then over $150,000). Now they tend to sell for around 35 ETH (~$57,000). The DAO has used its substantial treasury to fund a wide range of projects, from creating Nouns short films, to distributing eyeglasses to kids, to partnering with Bud Light for a Super Bowl commercial in 2022.
Now, however, more than half of the project has opted to leave, with some leavers citing flawed decisionmaking and lack of leadership. As for the new fork, some Nouns owners may choose to "ragequit" — that is, forfeit their NFT and cash out their portion of the treasury (around 35.5 ETH, or $57,850, apiece). Some arbitrageurs have been buying Noun NFTs for months, hoping to use this ragequit functionality to profit.
Party Parrot team prepares to "vote" to allocate themselves 80% of initial offering funds, around $60 million
You almost have to hand it to the Party Parrot team, they really figured out how to take advantage of ostensibly "decentralized" governance to line their own pockets. After raising $80 million in an "IDO" — initial DEX offering — in September 2021, the project is now embarking on a governance "vote" that would cash out the project treasury and distribute it to PRT token holders. However, the project team also unilaterally decided to unlock tokens held by the team in November 2022, meaning that the project now has access to 80% of the token supply — the same tokens that will decide the outcome of the vote.
If the vote passes, and it likely will given the massive supply of tokens available to the team, the team will have just decided to distribute around $60 million in remaining funds to themselves, leaving $12 million to the token holders.
One commenter on the proposal described the move as "a pure financial crime". Another wrote, "The community has already explained in painstaking detail why we're not interested in this. The pro-rata value is an extreme lowball and fails to account for many of the team's misuses of the treasury without the community's consent. The team also prematurely unlocked the team and VCs' vesting tokens, so they are the majority token holders, making this vote meaningless and a total farce."
Angry over the Azuki Elementals fiasco, Azuki holders form a DAO and immediately get exploited
After paying nearly $40 million for a new set of Azuki NFTs, the Azuki community is pissed that they were "dilutive" near-copies of the original Azuki collection. To fight back against the perceived "blatant scamming" by the Azuki creators, holders claiming to have collectively spent millions on Azuki projects formed an Azuki DAO. The DAO created a governance token, $BEAN, which it distributed to Azuki NFT owners. The DAO then embarked on a vote to hire a lawyer, sue Azuki's creator, and demand a refund of the 20,000 ETH (~$38 million) collectively spent on Elementals NFTs.
However, shortly after the DAO was created, the governance token was exploited. Attackers were able to take advantage of a flaw in the smart contract, with two exploiters stealing around 35 ETH (~$69,000). The DAO paused the contract to prevent further thefts.
File this one under "adding insult to injury".
CFTC awarded default judgment in case against Ooki DAO
Ooki DAO was sued in September of last year for allowing illegal trading of digital assets, engaging in activities only allowed by registered futures commission merchants, and not performing proper KYC. It was a potentially landmark case, as one of the first actions to be taken against a DAO and an opportunity to test various DAOs' claims that by decentralizing governance, they can skirt regulatory enforcement.
Now, a judge has awarded default judgment in the case, requiring the DAO to pay a more than $640,000 penalty, close down its website, and stop trading.
The court held that the Ooki DAO was a "person" under the Commodity Exchange Act and thus could be held liable for violations of the law.
- Order on Motion for Default Judgment, Commodity Futures Trading Commission v. Ooki DAO
Tornado Cash DAO suffers hostile takeover
A proposal ostensibly to penalize cheating network participants in the Tornado Cash crypto tumbler project successfully passed by DAO vote. However, the proposer had added an extra function, which they subsequently used to obtain 1.2 million votes. Now that they have more than the ~700,000 legitimate Tornado Cash votes, they have full control of the project.
The attacker has already drained locked votes and sold some of the $TORN tokens, which are governance tokens that both entitle the holder to a vote but also were being traded for $5–$7 around the time of the attack. The attacker has since tumbled 360 ETH (~$655,300) through Tornado Cash to obscure its final destination. Meanwhile, $TORN plummeted in value more than 30% as the attacker dumped the tokens.
The attacker now has full control over the DAO, which according to crypto security researcher Sam Sun grants them the ability to withdraw all of the locked votes (as they did), drain all of the tokens in the governance contract, and "brick" (make permanently non-functional) the router.
Around $110 million "stuck" in Aave protocol on Polygon due to a bug that can't be fixed for a week
Recently, the Aave protocol deployed a contract upgrade on the Polygon version of their v2 project that was not compatible with Polygon. The bug has resulted in around $110 million of funds in wETH, wBTC, USDT, and wMATIC being "stuck", meaning users can't perform any actions involving those funds.
The funds are not at risk, but it will take at least a week before the funds are unstuck because any code change requires a DAO vote. "Considering governance times, if approved, the fix will be applied in approximately 7 days from now: 1 day of delay to start voting, 3 days of voting, 1 day of timelock on Ethereum, and 2 extra days of timelock on Polygon," explained a post by Bored Ghost Developing, a contributor to Aave.
Aragon DAO faces governance crisis
As the Aragon Association took steps to "progressively decentralize" their centralized project by assigning more control to the Aragon DAO, they encountered some challenges. Aragon, somewhat ironically, is a platform for creating and running DAOs that has been "stewarded" by the Aragon Association, a non-profit run by a small committee.
In June and October 2022, the Aragon DAO — that is, all holders of the $ANT token or (later) their delegates — voted on several proposals supporting a move to place the Aragon treasury under DAO control. The treasury is a pool of crypto assets currently priced at around $174 million. However, the tokens continued to remain under control of the Aragon Association.
On May 9, 2023, the Aragon Association announced that they would not be following through with the treasury change, and instead would be "repurposing the Aragon DAO into a grants program". They attributed the decision to "coordinated social engineering and 51% attack" on the DAO that began shortly after a small portion of the treasury assets were transferred.
A week before the announcement, Aragon also banned a group of token holders from the group's Discord channel. Aragon characterized the group as appearing "coordinated" and alleged the group was "engaging in harassment". They claimed the group were members of the "Risk Free Value Raiders", which they described as "a sophisticated, well-resourced, and coordinated group of actors that target crypto projects with an imbalance between the value of their token and treasury". They also accused the group and its members of coordinating governance attacks on other DAOs, including Invictus DAO and Mango Markets. Aragon wrote that they believed the RFV Raiders were aiming to "[extract] value from Aragon for financial profit" rather than pursue the DAO's goals of supporting developers building DAO infrastructure.
One of the banned members told a different story, publishing and later taking down a statement in which he claimed that they were trying to get answers to questions about why the Aragon team was so slow to enact the DAO vote. "We find these bans, failure to empower the community with treasury transfers, and overall lack of transparency to be frustrating and against the ethos of both what DAOs are meant to be and what Aragon team members have repeatedly said they stood for. However, these actions have become a common pattern for Aragon," he wrote.
On May 11, Aragon apologized for how they handled the crisis, unbanned the banned Discord members, and announced that they would "keep following a gradual [treasury] transfer approach, making sure it aligns with the mission of the project", but continued to characterize the members as attackers and reiterated that "we won’t stand for hostile and coordinated attacks".
Kyiv Post alleges misappropriation of funds by Ukraine DAO
2,258 ETH (~$4.2 million at today's prices) was raised via the sale of an NFT of the Ukraine flag (attribution)Ukraine DAO is a project that emerged shortly after the Russian invasion of Ukraine, aiming to raise cryptocurrency funds to support Ukrainians. Despite the name, it is not a DAO in the typical sense where token holders have voting rights in the project. The initiative has raised millions in donations, and at least $5 million has gone to the Ukrainian government or legitimate charities. The group's website claims $7 million has been donated in total.
However, the Kyiv Post has recently been asking questions about the organization. Earlier in April, the newspaper published an article claiming that the group had fabricated its claims that it was supported by Ukrainian governmental bodies. Now, they've published another article claiming that at least $500,000–$700,000 of funds seem to have been misappropriated.
One point of contention has been that the organization claims that 100% of money raised is donated, but in reality the project leader Alona Shevchenko takes a $5,000/month salary. This led to a split between Shevchenko and Pussy Riot's Nadya Tolokonnikova, who had once been active in promoting Ukraine DAO.
The Kyiv Post has raised questions about other transactions from the Ukraine DAO wallet, which went to other leaders of the project, or to centralized exchanges.
Shevchenko a London-based Ukrainian, who has in the past led the FreeRossDAO — a project to raise funds to support Ross Ulbricht, the jailed creator of the crypto-powered darknet Silk Road marketplace. Shevchenko's most recent project is Iran DAO, which claims to support "Iran's women-led revolution".