Polygon Foundation Accused of Misappropriating 400 Million MATIC

On January 15, the Polygon Foundation transferred 400 million MATIC (approximately $340 million at the time of writing), intended for the community, to the cryptocurrency exchange Binance. This was reported by researchers at ChainArgos.

1/ Polygon allocation problems and suspicious flows to exchanges.

Let’s look at a very large project and explore how the allocations were not done in line with the publicly stated plan. And show some, um, suspicious flows to an exchange.

This has been part of our demo for quite…

— ChainArgos (@ChainArgos) January 15, 2024

According to Polygon’s tokenomics, the project fund was supposed to allocate 1.2 billion MATIC (12% of the total issuance) for staking rewards. However, the organization sent only 800 million MATIC to the corresponding smart contract.

Investigators reported that the remaining 400 million MATIC were moved to an address named “Binance 33.” From there, 300 million MATIC were sent to an unidentified wallet, which had previously received 467 million MATIC from “Matic: Marketing & Ecosystem.”

Subsequently, all funds — 767 million MATIC — were transferred to other Binance exchange wallets.

Questioning how such maneuvers were possible, ChainArgos discovered several smart contracts managing asset movements.

The first “protocol of rights transfer” mechanically unlocks all fund flows.

The second smart contract is directly owned by the Polygon Foundation and allows simultaneous management of the project’s reserves and other allocations.

Thus, almost all Polygon fund flows pass through the foundation.

The process of moving tokens for rewards began in June 2020, around the time the corresponding contract was deployed.

On-chain data shows that the volume of funds in it gradually grew from zero to 800 million MATIC. However, according to the stated tokenomics, the address should have initially contained 400 million tokens, with the total amount reaching 1.2 billion.

“The [Polygon] team and Binance are clearly working together to transfer these tokens in their original form. Since we are talking about 767 million coins at a rate of about $1-2, this is approximately a billion dollars,” analysts suggested.

Comparing the MATIC price chart with the dates of fund transfers, ChainArgos suggested that such movements could have caused sharp fluctuations in the asset’s prices and their subsequent decline.

In November 2023, CoinDesk reported a connection between Polygon and the betting company DraftKings. The firm had been a network validator for an extended period, charging a 100% staking fee.