Three DeFi projects face possible exclusion from future Arbitrum DAO programs

Arbitrum's Watchdog Committee, a grant oversight body, has given three DeFi projects until a tentative Sept. 10 deadline to answer high-severity misuse findings and return funds it considers unresolved, or face separate votes on permanent exclusion from future DAO programs.

The cases name Good Entry, Limitless and APX Finance, formerly ApolloX. Their cited figures add to 457,553 $ARB, but that total combines different findings rather than representing one amount established as stolen, outstanding or recoverable.

As of Sept. 5, no response from any of the projects appeared in the proposal thread. The committee described the schedule as tentative and said a vote would follow only if a project's explanation is unsatisfactory and its respective funds are not returned within the one-week window. No ban has been approved.

For Good Entry, the committee said on-chain analysis found 142,839 $ARB was distributed to 1,032 ineligible users during and after the Short-Term Incentives Program. It also alleged self-farming by wallets connected to team addresses and said the project refused to provide clarification. Good Entry's grant application requested 200,000 $ARB, so the watchdog figure covers part of the grant and describes distributions rather than a remaining balance.

Limitless is accused of swapping 75,000 $ARB into USDC and transferring the funds to Base. The watchdog said team members could not be reached for clarification or recovery. The figure matches the 75,000 $ARB requested in the project's LTIPP application.

The APX Finance finding is less cleanly reducible to a repayment figure. The committee tied 239,714 $ARB to overlapping issues, including an unspecified substantial portion left unutilized in treasury addresses. It also cited late transfers to distributor contracts and alleged team-linked Sybil activity. APX had requested 525,000 $ARB in its application, but the proposal did not break down the 239,714 $ARB by issue.

What the proposed bans can enforce

Each project would face its own off-chain Snapshot vote. The proposal says a ban involving an operating project would cover founders, current team members and affiliated contributors. For projects no longer operating, it would apply only to founders.

The votes would seek social consensus and require no on-chain action. Their stated consequence is that covered projects or people would become ineligible for future programs run by the Arbitrum DAO. That makes the measure a governance-access sanction; it would not itself execute a wallet freeze or disable a protocol.

The watchdog said that, as of Sept. 2, the broader program had received 90 reports, recovered about 532,000 $ARB and distributed about 268,000 $ARB in reporter bounties. The next signal is whether any of the three projects answers before Sept. 10, followed by whether the committee proceeds with its tentative Snapshot timetable.