Fei protocol’s plan to exit the Tribe DAO has created a new drama in the DeFi space after the Frax Finance founder alleged that FEI is refusing to refund those who lost money in an early exploit.
Fei Labs, a key member of the DAO, submitted a proposal stating that the best way forward for the Tribe DAO is to provide compensation for hack victims, redeem FEI for DAI, and distribute the remaining protocol-controlled value (PCV) to Tribe holders.
However, not everyone is pleased with the proposal. Frax founder Sam Kazemian has criticized the proposal, saying it is the most “egregious ‘DAO/DeFi’ situation” he has ever seen.
The criticism is due to a part of the proposal that plans to compensate hack victims with 88.9 million unvested TRIBE tokens worth $16 million. This is much lower than the $80 million lost in the hack.
The current controversy started when Fei Protocol merged with RariCapital DAO in 2021 to create the Tribe DAO. Later in April 2022, an exploit of the Fei-Fuse money market led to the loss of $80 million.
At the time, Tribe DAO had a governance vote on whether to reimburse the exploit victims. The majority of the DAO voted in support of this. But the reimbursement did not happen.
A few months later, with the crypto bear market in full swing, FEI submitted another proposal to do the reimbursement vote again, saying the last one did not count. This time around, the vote did not pass.
Now, major backers of the Fei-Fuse, such as Frax finance, are accusing the Fei Protocol of reneging on the repayment. According to Sam Kazemian, the protocol lost about $13 million and intended to use the repayment to strengthen its FRAX stablecoin peg.
He added that FEI has “enough PCV to redeem every stablecoin at the peg, repay every cent to victims, & STILL have ~$65m in value for $TRIBE holders to redeem & profit.”
But it is choosing to leave the major hack victims with most of the losses instead. The current proposal offered to pay Frax 2% of its $12.3 million loss, Olympus DAO 3% of the $8.9 million loss, Balancer Labs with 19%, and VesperFi with 27%.
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