Compound Foundation accused of ‘misappropriating’ DAO funds

DeFi lending protocol Compound Finance has once again found itself embroiled in DAO drama. A Compound community member, username “ugurmersin,” has accused the Compound Foundation of the “misappropriation” of 8.42 million DAI.

According to a post on the project’s governance forum, the sum was used to buy 344,780 COMP tokens which were delegated to the Foundation’s voting address.

They were then used to vote on two proposals, one of which included the transfer of $14 million to the foundation for a year’s development of the v4 protocol.

The foundation has responded to the allegations, defending its actions as consistent with the conditions under which the funds were granted.

Both proposals mentioned in the accusation had enough votes to pass without the foundation’s additional COMP.

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“Misappropriation” of DAO funds?

The funds in question were left over from the reserve of Compound’s now-deprecated v2.

Proposal 536, passed in February, handed the DAI over to the foundation to be used “in a manner prudent for addressing important protocol needs.”

It “does not establish an explicit treasury management program,” though it does state that the foundation is “allowed to maintain sufficient COMP availability for protocol components that depend on it, such as reward distribution and other forms of governance execution.”

Ugurmersin’s post takes issue with using the funds to vote on proposals 580 and 582 which “moved nearly the entirety of DAO funds” to a Treasury Management Committee (which he believes “has a separate control issue”), and approved the $52 million v4 package which “benefits themselves.”

The foundation responded to the allegations in its own forum post, stating that Proposal 536 “expressly did not prescribe” how the money was to be spent and “excluded only ‘discretionary trading/speculative activity,’ non-essential operations, and Foundation overhead, personnel or vendor costs.”