Analyst Demands $1 Million for Revealing Vulnerability in USDe Stablecoin

On-chain investigator TardFiWhale has raised concerns over structural weaknesses in the “synthetic stablecoin” USDe, developed on Ethereum by the Ethena Labs team.

They’re paying me off to stop shitposting Ethena; how they’re launching a bug bounty program AFTER launching their token allowing insiders to cash out from their shard campaign participation and hedge out with perps while not publicly disclosing material risks omitted from docs. https://t.co/twYeJ3CcSI

— TardFiWhale.eth (@TardFiWhale) April 1, 2024

“They’re paying me to stop posting negative content about Ethena. How are they launching a bug bounty program after launching their token, allowing insiders to profit from campaign participation and hedge against criminals without publicly disclosing significant risks not mentioned in the documents?” he wrote.

TardFiWhale’s statements carry significant weight in the crypto community, as he predicted the collapse of the Terra ecosystem and the UST stablecoin months before their downfall.

In mid-March, the researcher requested a reward of $500,000 for revealing a vulnerability in the “stable coin.” He later increased this amount to $1 million.

Bounty has gone up to $1mm. 50% @ProtocolGuild , 25% @zachxbt , 25% @rstormsf and @alex_pertsev legal defense.

Why? Maker is making proposals to push hundreds of millions into a currently broken product in USDe. Mantle has 90mm in @ethena_labs

Retweet to make this happen https://t.co/dboF6bFd2m

— TardFiWhale.eth (@TardFiWhale) March 19, 2024

TradFiWhale stated his intention to prevent another financial catastrophe, reflecting on past crises in the crypto sphere.

“For me, this is a chance to repay a debt. After all the pain caused by UST, FTX, Celsius, and so on, it would be sad to see another disaster with USDe. Now for some context: Ethena is currently earning about 35% annually on $1.08 billion with ~$1 million in daily accrued interest,” noted the analyst.

He intended to allocate the potential reward for discovering the vulnerability to the Protocol Guild team (50%), another on-chain investigator ZachXBT (25%), and for legal support to the developers of the crypto mixer Tornado Cash — Alexey Pertsev and Roman Storm (25%).

TradFiWhale criticized certain industry participants for promoting an unsafe project, particularly former BitMEX CEO Arthur Hayes.

“Your favorite influencer continues to shill Ethena, and you see TVL at $1 billion. It must be safe, right? Sorry, Arthur, it’s not. Remember, UST’s figure reached $18 billion. TVL is not a good metric for safety. Many influencers praised it just as they praise [USDe] now,” emphasized the expert.

Hayes discussed Ethena on journalist Colin Wu’s podcast. During the conversation, he mentioned the “potential risks” associated with the stablecoin but did not delve into details.

He mainly spoke about the protocol’s significant opportunities and predicted its TVL could grow to $10 billion and beyond. Hayes also suggested future competition between USDe and USDT.

On April 2, Ethena Labs opened a claim page for 750 million governance tokens ENA. Several centralized platforms, including Binance, listed the asset.