Justin Sun accused of manipulating governance in the Compound protocol

Tron founder Justin Sun has been accused of a “governance attack” on the lending protocol Compound. GFX Labs analysts claim he attempted to use a COMP loan to push a proposal to integrate the stablecoin TUSD as collateral.

An unplanned TUSD proposal has been proposed @compoundfinance to set TUSD’s collateral factor to 80% (currently 0%) https://t.co/Xf2oOEKJya

— GFX Labs (@labsGFX) February 4, 2022

According to on-chain data, on February 3 Sun’s address borrowed 99,000 COMP (~$13.7 million), and then sent 102,000 COMP to the Binance exchange.

On Friday the address, receiving COMP tokens worth $9 million from Binance, proposed adding TUSD as collateral on the Compound platform. 

GFX Labs has no evidence that the address submitting the proposal is controlled by Sun. However, in a conversation with CoinDesk, an analyst going by the handle PaperImperium noted that the situation resembles a similar vote initiated by MakerDAO in January.

«Justin borrowed a large amount of MKR via Aave. Supposedly, this was done to vote on a poll about creating a TUSD-DAI module. After it was noticed, he returned MKR just before the vote», — PaperImperium said.

After the vote, a TUSD representative wrote on the MakerDAO forum that the project did not know about the Tron founder’s actions and “would never risk working with Justin Sun or other whales to manipulate votes.”

On the TUSD site Sun is listed as an adviser on Asian markets. In late 2020, in the project’s blog, a post appeared that “ownership of TUSD will pass to an Asian consortium, which will work with Tron to support TUSD in Ethereum, Tron and other blockchains.”

Compound founder Robert Leshner called the story “spicy and interesting,” but stressed that borrowing COMP to submit the proposal is not a governance attack on the protocol.

While this story is spicy and interesting, borrowing COMP to launch a proposal isn’t a governance attack against the Compound protocol, for a few reasons: https://t.co/Fqxc9dDUEj

— Robert Leshner (@rleshner) February 5, 2022

He explained that the governance system of Compound accounts for whales and lending markets, so this is expected behaviour. Leshner also noted that Sun’s proposal was not malicious:

«This is a self-serving sale (benefiting the asset sponsor, TUSD), but everything is carried out within standard levers (COMP incentives and collateral factors). An attack, in my view, would have drained user funds, harmed the protocol or caused some damage. The governance process will decide whether this proposal is good or not».

In December 2021, Sun stated that will leave the Tron Foundation and take the post of Grenada’s representative to the World Trade Organization.

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