Divergence Ventures Analyst Earned $2.4 Million via Ribbon Airdrop Exploit

A Divergence Ventures analyst Bridget Harris used an exploit that emerged during Ribbon’s May airdrop and earned more than $2.4 million in RBN tokens.

this @divdotvc analyst @_bridgeharris has made 652 $ETH and counting from @ribbonfinance airdrops, quite impressive. finding wallets like their’s and copytrading them is probably the best way to make it tbhhttps://t.co/vqC1LjyfT3

— Gabagool.Ξth 🥀 (@gabagooldoteth) October 8, 2021

The Ribbon Finance project team configured token distribution to ensure that “smaller depositors” benefited more from the airdrop.

However, due to the whale-centric nature of many DeFi applications, most of the liquidity comes from a small number of addresses. 🐳

We wanted to create a more equitable distribution, so we applied a transformation on the distribution that favored smaller depositors.

— Ribbon Finance (@ribbonfinance) May 27, 2021

«Из-за ориентированного на китов характера многих DeFi-приложений большая часть ликвидности поступает с ограниченного числа адресов. Мы хотели создать более справедливую систему распределения, поэтому применили к ней преобразование, которое содействует участию более мелких вкладчиков», — написала компания в мае.

Because Divergence Ventures is an investor in Ribbon Finance, Harris was familiar with this system and could anticipate the forthcoming token unlocks. Using a large number of wallets, she sent transfers of 0.148 ETH to the project’s address. For each such transaction, the analyst received about 15,400 RBN.

On October 7, the project’s community voted for token unlocks — users could trade assets. According to CoinGecko, at launch RBN traded near $4.4. In the sale, Harris earned 702 ETH (~$2.47 million at the time of writing).

Against this backdrop, the price of RBD fell 17%, to $3.27.

The community accused Harris and Divergence Ventures of unethical behavior — the analyst may have used insider information to profit.

4/7

If the VC firm had insider info on the farming and took advantage of that, it’s super shitty and other projects should seriously avoid letting them into rounds.

But that’s on them and not on Ribbon.

— Adam Cochran (@adamscochran) October 9, 2021

Ribbon Finance’s community manager refuted these accusations. Divergence Ventures itself admitted that it had “crossed a line,” and asked the community not to harass Harris, who “is not well-versed in cryptocurrencies and is still learning.”

1/6@_bridgeharris is a brilliant young woman new to crypto and still in college. Don’t drag her, drag us (@glambeth94 @cjliu49) we run Divergence, and we’ve been in the space for many years.

We realized that in sybil-ing the $RBN airdrop, we crossed a line. A few notes:

— Divergence Ventures (@divdotvc) October 8, 2021

The company also confirmed that these actions were part of a deliberate strategy. Divergence Ventures was a minority investor in Ribbon Finance (its check was $25 000), so it did not have insider information — the firm “simply suspected there would be an airdrop.”

«Одна из задач Divergence Ventures — зарабатывать деньги. В криптовалюте этот процесс, как правило, похож на игру — обернутые токены, кроссчейн, предоставление ликвидности, стейкинг, торговля, сжигание, факционирование… и участие в эирдропах. Играя в эту игру, мы постоянно пробуем разные тактики. Большинство оказываются неудачными. Эта “работала”, работала, очевидно, относительно успешно», — написала компания. 

The cryptocurrency Harris received was returned to the project’s treasury by Divergence Ventures. By vote, the Ribbon community can decide what to do with the assets.

In September, the NFT marketplace OpenSea fired an employee was caught in insider trading.

Later, the head of the platform Devin Finzer said that the employee’s actions cannot be characterized in this way, because the company “does not regard NFTs as financial assets.”