A DeFi lobby group, which received $20 million in funding earlier this month from the decentralized exchange Uniswap’s governance treasury, sold half of its funding on Tuesday — despite the group promising that it would allocate the funds over the next few years, not days.
“The proposal outlines that these funds are anticipated to be allocated over the next 4-5 years, so it won’t have the same dilutive effect of selling 1M UNI all at once, which we agree would be a problem,” wrote a representative of the “DeFi Education Fund” in Discord, ahead of the on-chain vote.
Yet it announced — just eight days after receiving the funds — that the group has sold 500,000 UNI for just over $10 million of the U.S. dollar-backed stablecoin USDC, presumably to fund its plans.
This move caused surprise and consternation in the Ethereum community, which expected the large supply of tokens to be sold more gradually, and it highlighted the lack of any enforceable conditions tied to the grant money.
Where did the idea come from?
The idea for the lobby group was suggested by Harvard Law’s Blockchain and Fintech Initiative on May 27 and was described as a political grants committee with board members who are legal and policy experts.
On June 1, the group submitted a longer proposal for the entity, which it plans to turn into a 501(c)(4) “policymaking machine.” The main goal was to lobby for regulatory clarity for the DeFi industry. It said that the 1 million UNI needed was just “an initial infusion.”
Before the main vote, there were two snapshots taken to gauge the community’s reception to the idea.
For the second snapshot at least, it appears that the majority of the votes were from the proposer themselves, along with "Kenneth NG" and two other student groups. These four entities comprised 86% of the yes vote. (Although the tokens themselves were delegated to the student organizations by a few unknown whales.)
Those voting against the snapshot included DeFi lending platform Compound CEO Robert Leshner and Ethereum investor “DC Investor,” who each put 5 million UNI behind their votes.
The vote passes
On June 29, the main on-chain vote for the proposal ended, with 79 million UNI for it and 15 million UNI against.
The lobby group said that well-known crypto individuals are supporting the project, by holding the keys to its multisig wallet, which controls access to the funds. These include lawyer Jake Chervinsky, Orca Protocol advisor Larry Sukernik and Aave general counsel Rebecca Rettig.
On July 4, the lobby group received the funds from the Uniswap governance. It then worked with OTC firm Genesis Trading to sell the UNI, netting around $10.2 million in USDC.
The group has said that it is already hiring a policy director to establish a strategy for the fund and to engage with policymakers, in the range of $150,000 to $250,000.
Following the sale, Chris Blec, founder of DeFi Watch — a platform trying to encourage transparency in DeFi — has published eight questions on the Uniswap governance forum demanding answers from the DeFi Education Fund about the fund and how it originated.
Prior to the vote, he had written a letter to the lobby group, and immediately after it passed he wrote a letter to venture capital firm a16z. On the forum, he said both letters were ignored.
The Block has also reached out to Harvard Law’s Blockchain and Fintech Initiative and will update this article if we hear back.
Update: This article been amended to show that Kenneth NG isn't the Slingshot Finance COO Kenneth NG.
H/T to @bebop98 on Twitter for pointing out where the “4-5 years” comment was made.
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