Lido DAO Governance Holds Onto 39 ETH Despite Sushi Recovery Effort

Key Points:

• Lido DAO governance voting on returning funds lost in SushiSwap attack.
• More than 885 ether has been recovered.
• An overwhelming majority of Lido community members (99.92%) have voted to not return the 39.8 ETH back to Sifu.

Lido DAO governance is currently deliberating on a proposal that would see the return of funds that ended up in its execution layer rewards vault following a SushiSwap attack that resulted in a $3.3 million loss last month.

The majority of the lost funds were attributed to Michael Patryn, otherwise known as Omar Dhanani, who is an alleged serial scammer and a co-founder of QuadrigaCX, which is now bankrupt.

It is worth noting that more than 885 ether has already been returned, but a portion of the lost funds, roughly 39.8 ETH, that was redirected to the Lido execution rewards vault had yet to be recovered as of publication.

To address this, a proposal to return these funds had been flagged with the Lido team, and a related snapshot vote was posted last week. As of publication, an overwhelming majority of Lido community members (99.92%) have voted to take “no action,” choosing not to return the funds back to Sifu.

Despite the proposal making sense on the surface level, Misha Putiatin, the CEO of Statemind, noted on a discussion thread that there could be severe ramifications to the protocol if it were to be approved. He pointed out that without a clear framework, Lido DAO could be heavily throttled by an inflow of hack reimbursement proposals. In case of reimbursement, Lido DAO would need to be an arbitrary judge of what constitutes legal or illegal activity for other protocols which is way beyond its usual capacity and might bring unpredictable legal risks.

Pseudonymous user Hasu, a strategy adviser for Lido, also weighed in on the issue, noting that the outcome will likely have significant consequences for Lido’s future decision-making. Hasu opined that whatever Lido DAO governors decide will not affect the case of Sushi primarily, but it will create a precedent that will henceforth act as a policy, whether they like it or not. As such, he proposed that Lido never act as an arbitrator between stakers, node operators, and third parties to avoid similar issues in the future.

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