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Exclusive: Almost $15M in missing funds returned to Compound


invezz.com 04 October 2021 19:55, UTC
Reading time: ~3 m

Around $80 million went out to DeFi staking protocol Compound (COMP/USD) users by mistake last week. The weekend brought dismal news, as $22 million more were lost due to the same bug and another $44 million are at risk. 

Thankfully, things started looking up on Monday. The crypto processing and exchange platform ChangeNOW managed to return about $14.5 million of the missing funds to Compound. 

What exactly happened?

At the end of last week, a user created a 45,505 COMP transaction at ChangeNOW. Soon thereafter, it was flagged by ChangeNOW’s proprietary, intelligent risk management AML system. The system was developed by ChangeNOW. 

As ChangeNOW reported to Invezz, the user contacted the platform and supported them in the decision to return the funds to Compound. Furthermore, the user declined a 10% white hat, asking to return the full amount. 

ChangeNOW head of PR Mike Ermolaev told Invezz:

We do believe in good karma. We believe that behind every situation, you should always put people above business, it doesn’t matter if we are talking about 1 dollar or 15 million. That’s why we investigate every untypical situation. We are happy to contribute to the Compound situation and we believe it’s natural to build relationships on human values like trust and solidarity. This is the true demonstration of core crypto principles, and well, that’s why we are all here, right?

Compound confirmed the receipt on Twitter. Leshner tweeted:

Thank you @ChangeNOW_io for returning 45,505 COMP to the community!

On the day of the news, COMP plummeted by almost 13%, but recovered later. ChangeNOW’s return was the first large and positive response to Leshner’s request. 

The Compound update involved a new Comptroller contract, which contained a one-letter bug according to Gupta, a core developer at SushiSwap (SUSHI/USD). This bug led to some users getting too much COMP. Unfortunately, it wasn’t possible to stop the distribution. Leshner explained:

There are no admin controls or community tools to disable the COMP distribution; any changes to the protocol require a 7-day governance process to make their way into production.

Another $66 million was added to a defective Compound Finance contract put in place to disburse liquidity mining rewards, of which a third was exploited. The reason was the same glitch that drained $80 million in tokens from Compound last week. On Sunday morning, the Yearn.Finance DeFi developer ‘banteg’ tweeted that the remaining $44 million was also at risk.

Will the other recipients also return the money? History shows they might. A few months ago, DeFi protocol Alchemix had a similar incident, and almost everyone who got the extra money refunded the platform.

It is also not the first time ChangeNOW is assisting in such situations. In 2019, ChangeNOW retrieved 500,000 XRP for GateHub after an exchange lost about $22M during a hack. ChangeNOW improved its AML system after the GateHub incident.


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