Compound Foundation Accused of Misappropriating DAI Reserves

Author: Eric, Foresight News

On September 28, a post titled "Foundation Misappropriated v2 DAI Reserves" appeared on the Compound governance forum.

Author ugurmersin accused the Compound Foundation of violating its governance mandate by converting 8.42 million DAI reserves entrusted by the DAO into governance tokens COMP (the governance token), and delegating voting power to the Foundation's own address 58 minutes before the voting deadline for a key proposal, thereby pushing through a $52 million V4 plan and the transfer of treasury management rights. The post included complete on-chain transaction records, used harsh language, and hinted that evidence had been preserved for potential legal action.

According to the author's verification, the fund flow described in the post is essentially accurate. After the issue was exposed, COMP only fell by about 1%, and began to rebound continuously from 11:00 on September 29. At the time of writing, COMP is priced at $24.55, having recovered all of yesterday's losses.

On March 10, the Foundation's multi-signature address starting with 0x0F51, which held DAI, converted 8.42 million DAI into an equal amount of USDC through Spark PSM at a 1:1 ratio, and then deposited it into the Compound v3 USDC market;

From March 11 to 12, the Compound Foundation first spent about 430,000 USDC to buy 25,000 COMP through OTC. On April 9, 15, and 25, it withdrew 7.988 million USDC from v3 in three transactions, transferred it to an intermediary wallet starting with 0xfb20, and then moved it in million-dollar increments to a Binance deposit account;

Subsequently, an address starting with 0xb03e withdrew approximately 420,000 COMP from Binance hot wallets and Wintermute addresses. On May 5, 344,780 COMP were returned to the Foundation's multi-signature wallet via an intermediary address starting with 0x729d.

Independent verification by third-party data provider Bitquery confirmed that the DAI was indeed converted to USDC and flowed into Binance through trading desks, and approximately 345,000 COMP subsequently flowed out of the exchange and returned to a multi-signature wallet managed by the Foundation. The arrival time was indeed less than an hour before the proposal snapshot, and the voting power had indeed been delegated to the Foundation's public voting address. The Foundation later issued a statement acknowledging the transactions, but argued that they were within the scope of the original proposal to maintain the COMP reserves needed for governance execution, and that the assets still belonged to the DAO and were not used for the Foundation's own expenses.

If the story ended here, it would seem to be a typical case of a fiduciary overstepping its authority. But Bitquery's verification also revealed another side of the post. Just five days before posting, the same author wrote in another forum post: "Everyone here knows that Humpy is delegating votes to me." This sentence changed the nature of the entire incident.

Humpy is one of the most controversial whales in DeFi. In 2022, he gained control of governance decisions in Balancer by accumulating voting power, and after nearly a year of struggle, a settlement agreement was forced. In March 2024, the head of SushiSwap publicly accused him of trying to manipulate token emissions to flow into his own pools. In July of the same year, his Golden Boys group pushed through Compound Proposal 289 after three attempts, trying to direct $24 million worth of treasury COMP into a yield product they controlled, which was widely considered a governance attack by the community and ultimately ended with a settlement that increased proposal execution delay and established a staking product. Security firms such as OpenZeppelin and Wintermute characterized it as a predatory attack on the protocol at the time.

On-chain records show that after May 2026, address clusters associated with Humpy became active again.

Bitquery tracked 33 wallets holding a total of approximately 1.61 million votes. These COMP tokens were gradually consolidated into a single address between May and September, which exercised voting power uniformly. On September 14, a delegation of about 25,000 votes pushed that address past the threshold required to submit proposals. Five days later, Proposal 608 was submitted on-chain, which would transfer control of a new institutional lending market to DAO governance. This proposal was drafted by ugurmersin himself on the forum on September 9. The associated cluster passed it with 1.77 million votes in favor, while the Foundation voted against but was unable to block it. The subsequent routine Proposal 609 was vetoed by the same voting bloc.

This reversed the narrative. The COMP purchased by the Foundation with reserves made Proposals 580 and 582 mathematically immune to potential opposition from that cluster. Without these tokens, the cluster's holdings at the time could have overturned the proposals. In other words, the controversial purchase effectively defended against the forces associated with the poster. And when the accusation post was published, the cluster had just completed a successful power expansion through its own proposal and demonstrated for the first time its ability to veto others' proposals.

Compound's core task over the past six months has been developing the v4 version, focusing on institutional credit infrastructure, RWA support, capital efficiency improvements, liquidation mechanism upgrades, and partner integration tools. The proposal that caused this controversy was a routine one to hand over remaining reserves in the market to the Foundation after deprecating the v2 version.

In May, Compound established a "Treasury Management Committee" responsible for managing almost all of Compound DAO's treasury assets. The committee is a multi-signature controlled body responsible for allocating treasury funds to professional asset managers (through RFP bidding) for prudent asset management.

The Foundation's use of remaining funds from a deprecated version was essentially a defensive operation to ensure the smooth development of the protocol's "grand plan" v4 version. On the other hand, Compound's actions also align with a major trend in current DAO governance: partially reclaiming fund management authority for the project team, "pooling resources for major initiatives."

On September 8, Compound launched its first v4-related product, the Institutional Market, offering a USDC lending market that accepts ETH, wstETH, WBTC, cbBTC, etc. as collateral, with a maximum LTV of 87% and higher liquidation thresholds. Within a week of launch, the product attracted approximately $20 million in deposits and $14.8 million in borrowings.

It must be emphasized that the on-chain facts underlying the accusation have not been overturned. The DAI was indeed converted to COMP, the delegation to the Foundation's own address is real, and the arrival 58 minutes before the snapshot is real. Whether the Foundation's actions fully complied with the intent of the authorization remains a legitimate question for the community. But it is equally true that the accuser openly accepts delegation from a whale with a history of multiple governance attacks, that the proposal he drafted was passed with the support of that voting bloc, and that the timing of the accusation came right after the balance of power shifted. This is hard to view as neutral community oversight; it looks more like a public opinion offensive in a two-year-long war for control.