Across Protocol founders in hot water after accused of raiding decentralized autonomous organization (DAO) governance process. These allegations are indicative of the diversion of $23 million in tokens. This cash was sent to Risk Labs, a private entity affiliated with the protocol’s founders. This controversy comes at a very critical time. Cross-chain bridges, critical infrastructure for decentralized finance (DeFi) ecosystems, are facing increased enforcement pressure – though they shouldn’t be.
Across Protocol, a cross-chain enabler governed by a decentralized autonomous organization (DAO) recently had a very interesting proposal pass with overwhelming support from its community. A later proposal to request retroactive funding of 50 million ACX tokens to Risk Labs has sparked a firestorm. Opponents allege that insider voting tactics forced the second proposal to quorum. This unprecedented development provokes dire concerns about the fairness of Across Protocol’s governance.
The crux of the matter is the assertion that governance provided by the DAO was misused to advantage a for profit company in the DAO’s orbit. Across Protocol as one of the top token allocation recipients, Risk Labs, connected to founders of Across protocol. This has led to whispers of conflicts of interest and self-dealing. This has led to increased scrutiny of the processes and controls in place to prevent such occurrences within the DAO.
Adding to the layer of complexity is Across Protocol’s legal relationship as a Cayman Islands foundation company. These unusual legal structures, which do not have shareholders, can allow for the distribution of assets to beneficiaries for either commercial or philanthropic interests. Legal experts point out that this structure makes it impossible for Across Protocol to make the non-profit claims they’re making. This latest asset distribution to Risk Labs casts serious doubt on the actual intentions behind the DAO’s operations.
The allegations against Across Protocol have emerged during an extremely turbulent period for cross-chain bridges. These bridges are extremely important for providing interoperability between various blockchain networks, allowing users to move assets and information back and forth without issue. At the same time, they have increasingly become juicy targets for hackers, and thus trust and transparency need to be top of mind. Any perceived manipulation or governance failures within a cross-chain bridge project can significantly undermine confidence in the entire DeFi ecosystem.
As this investigation plays out, it’s unclear what the future holds for Across Protocol. But allegations of governance manipulation and token diversion have sunk the project’s reputation. Such damage may impair the platform’s hope to attract new users and partners. This controversy could serve as a precedent for other DAOs and cross-chain bridge projects. It is a reminder of the need for robust governance mechanisms and enhanced transparency within the growing decentralized finance ecosystem.
