coinculture.com
A proposal to give the Arbitrum Foundation 750 million ARB tokens, which is close to $1 billion, caused a stir in the ARB community over the weekend after the foundation said the vote would only confirm a decision that had already been made.
After the layer-2 protocol dropped its governance token into the air a few days earlier, the conflict started.
According to the AIP-1 proposal on Arbitrum’s DAO, the 750 million tokens would be used for special grants, reimbursing applicable service providers, and covering ongoing administrative and operational costs of The Arbitrum Foundation. At the time of writing, over 70% of tokens participating in the vote were cast against the move.
The foundation stated in a forum post on April 2 that AIP-1 was a ratification and not a proposition. It was also revealed that some tokens had already been exchanged for stablecoins. In other words, its budget and allocations of billions of dollars would not be subject to a governance process on the blockchain.
In recent days, nearly 50 million ARB tokens were transferred on-chain. The foundation said that 40 million tokens were given as a loan to an experienced player in the financial market. In comparison, 10 million tokens were converted to fiat currency for operational expenses.
5/ To address two key questions that are asked: 1) The Foundation did not sell 50M $ARB tokens and 2) the rationale behind an initial allocation of 750M $ARB was covered in significant detail in the forum post above.
— Arbitrum (💙,🧡) (@arbitrum) April 2, 2023
The Arbitrum Foundation said that the first symbolic attempt at governance failed because of problems with communication and decisions that were clearly not communicated correctly.
On the governance forum, members of the community pointed out that Arbitrum’s team has been dumping tokens that they had told the community were locked, saying that all tokenomics page shows only user airdrop + DAO airdrop tokens as unlocked and that the rest of the tokens will unlock in March 2024.
Others stressed that the expected transaction would be considered fraud under U.S. securities laws and that U.S. citizens who bought ARB tokens or got the airdrop could seek legal remedies.
Arbitrum foundation made a proposal (AIP-1) to allocate 750M ARB tokens for admin and op costs, but $ARB holders voted against it
Now they said the vote was just a formality, and they have already spent 50.5M (6.7%) of the proposed 750M $ARB
Your vote is not vote pic.twitter.com/lvhBbBesum
— Eden Au (@0xedenau) April 2, 2023
A community member stated, “I will be pursuing this with my lawyers and expect to file a securities fraud lawsuit in the next few days. […] Immediately, the Arbitrum Foundation is advised to halt all illegal sales of the token that are being done without any authorisation and against the provisions of the law.”
Arbitrum’s blockchain holds 65% of the Ethereum layer 2 market share, according to data from the layer-2 analytics site L2Beat. On March 23, the much-anticipated airdrop of its native governance token, ARB, happened. Hundreds of thousands of eligible users and DAOs got ARB. The airdrop claim page crashed soon after it went live because so many people were trying to use it.