AIP-99: Help Rari Hack Victims withdraw Apecoin Collateral from Protocol

Proposal Name: Repay Rari Hack Victims with frozen Apecoin collateral in Fuse Protocol

Proposal Category: Core: Ecosystem Fund Allocation

Abstract | In April 2022, DeFi Lender Rari Capital/Fei Lost $80M in a Hack, with various assets including ETH, FEI, FRAX, RAI, DAI, USDC, LUSD, wstETH, USTw, WETH, USDT being drained from collateral pools. With borrowing frozen, victims have not been able to withdraw their collateralized Apecoin from Fuse pools.

One of the “Fuse” pools within the Rari Platform which allowed collateralization of ApeCoin, Pool 127, was among the many that were compromised: https://app.rari.capital/fuse/pool/127

While Apecoin itself was not drained, the collateral is now frozen totally roughly 300,000 Apecoin, and there is no clear roadmap to these funds to be withdrawn after months of silence from leadership at Tribe/Fei. While their DAO has approached the idea of a formal plan to repay hack victims, Apecoin holders who provided this collateral are not eligible for direct hack repayment and are reliant on a volatile protocol that may not provide an opportunity to reclaim funds.

This proposal seeks to leverage the goodwill of the Apecoin DAO and community to grant Rari Fuse pool 127 victims with up to 337,532 Apecoin so impacted members of the community can be made whole. (Based on calculation on September 7, 2022)

Motivation | This relatively low cost action would help deploy Apecoin treasury reserves in a meaningful way that would create significant goodwill for the community and generate positive PR around the strength of the DAO. There are several notable figures in the community who would benefit from this action, who would certainly amplify a positive outcome. Disclosure: The creator of this proposal Bored.eth has an 80,000 Apecoin position in the Fuse pool that was impacted, accounting for 26.6% of impacted funds. If this proposal is approved, a detailed accounting of Apecoin victims and respective collateralized Apecoin that are frozen will be provided to Apecoin Foundation administrators.

Rationale

Put simply, due to the unfortunate hacking incident, there is a substantial amount of Apecoin that is effectively removed from the ecosystem, and thus not being put to good use. If one considers those coins “burned” right now, this grant is simply trying to bring things back to zero.

Specifications

To avoid any risk associated with the Fuse Pools residing in the Rari Capital application, this proposal suggests granting victims Apecoin directly via a multisig wallet managed by Apecoin DAO. Impacted wallets would be gathered via public on-chain platforms such as etherscan.

Steps to Implement

Enter steps to implement

  1. Upon successful vote to move forward, an accounting of frozen Apecoin collateral is provided to Foundation, inclusive of wallet IDs and amounts.
  2. Funds are dispersed promptly to hack victims.
  3. Victims sign an acknowledgement stating that if Rari/Tribe/Fei do eventually repay victims for frozen Apecoin collateral, that victims in good faith will find a way to return excess Apecoin back to the community. While the Foundation is not equipped to accept repayments, victims will be expected to leverage the Apecoin towards donations or grants that serve the community in a positive way.

Timeline | Considering the murky future of Fei/Tribe, it is imperative that action is taken sooner than later to make victims whole before protocols are further disabled.

Q3 2022

Overall Cost

300,000 Apecoin

I’m very sorry to hear about these troubles. There are some questions surrounding this proposal & how the DAO can input funds. Could you talk more about what the process would be for the Ape Foundation to add these funds to help victims of this hack? Share some of your expertise w/ us.

5 Likes

Thank you @0xSword for the feedback.

Some important additional context about the situation after the hack.

  • List item In May, DAO Governance voted to use funds to make those that lost money whole. A proposed $80m refund from Tribe to users of Fuse (which is owned and operated by Tribe). The refund was approved by the community via vote. (TIP-112.)
  • List item Subsequently, a Veto vote passed to cancel TIP-112. Tribe leadership claim the votes have been confusing, and they’re ordering a second vote.
  • List item Putting aside the nuance and details of another DAOs political issues, the fact remains that the Fuse protocol currently has paused all borrowing until a resolution is found, or indefinitely if no resolution is found.
  • List item While many are optimistic that eventually hack victims will be made whole, those who put non-hacked collateral into the system generally cannot extract their funds because there is no liquidity being supplied.

The goal of this proposal is to have the Ape Foundation supply the Fuse protocol with roughly 300,000 Ape Coin to help ensure that community members who collateralized Ape are able to extract their funds. There are several members of the Rari/Tribe community that would lend their expertise in facilitating this transaction. Long term, the Ape Foundation would be able to pull its loan back and be paid back for the loan, short term, Ape community members would be able to access this locked-up funds.

3 Likes

The current structure of the ApeCoin DAO won’t allow for “reclaiming” a grant, or issuing a loan. We can’t really receive income to the DAO directly. You’ll most likely want to adjust the proposal as an outright grant/donation, along with a party(maybe a charity) who is willing to carry out the procedures needed to ensure the funds are used properly.

You could include an agreement to redistribute the initial grant total back to the ApeCoin DAO community directly, burn the tokens, or just leave it as simple grant request. It maybe good to include an agreement that you wouldn’t just immediately withdraw and market sell the 80,000 APE, just to address the disclaimer.

4 Likes

Thanks @Lost this is helpful feedback. The goal was to make this feel like a lighter lift/decision for the DAO since the goal was to pay back the amount, but certainly a grant or donation would accomplish the same goal. The additional Disclaimer is also a strong addition and indeed the intention. I’m a long-time holder in the ecosystem (6 Bored Apes, 12 Otherdeeds) and a big supporter of all things Bored :slight_smile:

5 Likes

Since this AIP was presented, there have been some proposals made within that ecosystem to settle some issues. Do you have any insight into how these proposals are going so far? And will they help unlock the $APE that is stuck in the system? Any updates you can provide would be great!

2 Likes

Thank you @0xSword for mentioning this very timely piece of news. The Fei/Tribe DAO has indeed presented a proposal to repay all hack victims. Depending on how the aftermath plays out, this proposal may not need to move forward. That said there are a few scenarios where Apecoin victims may still need support.

  1. Because Apecoin itself was not one of the actual currencies hacked, victims funds are currently stuck in the lending protocol waiting to be released when liquidity is supplied. Since the make-goods are potentially being paid back to victims directly, it is possible that Apecoin collateral will remain frozen indefinitely.

  2. The repayment to victims may not result in a 100% repayment of funds, and there may be an opportunity for the Apecoin Foundation to supplement the Fei/Tribe settlement to make victims whole and show goodwill to the community.

It is likely that next steps with Fei/Tribe will not happen in the next 3 days so, any proposals moving into “Draft” mode here will be put on hold until the situation is more clearly understood. Thank you everyone for the input.

2 Likes

Understood. You’ll be given the choice to extend the feedback window at the end of the 3 days, or you might consider keeping us updated in general chat or somewhere. There’s quite a few people who care & it sucks that this happened. Hope to hear that it resolves itself with 100% repayment.

and i hope you hang out on the forums & give some feedback too from time to time! :slight_smile:

2 Likes

Hi @boredelon,

Your topic will be automatically closing in less than 24 hours. Are you content with the feedback received, or do you wish to extend community discussion for a further 7 days?

If we do not hear from you within 48 hours after your topic closes, your topic will be moved straight to the AIP Draft process.

We look forward to hearing from you.

- river

1 Like

I would like to extend please if possible.

3 Likes

This topic was automatically closed after 7 days. New replies are no longer allowed.

Hi ApeCoin DAO Community,

@boredelon has requested to extend the community discussion period for this AIP idea. This topic will automatically close a further 7 days from now. We encourage the community to continue to engage in thoughtful discussions through constructive criticism, honest feedback, and helpful suggestions.

Follow this Topic as further updates will be posted here in the comments.

- river

1 Like

Update: The Tribe DAO is in the process of winding down and it appears a solution is in place to repay hack victims. This is not 100% a done deal though. Should things go south, this idea may reemerge as a modified proposal that seeks a grant vs a loan (which many have pointed out would be harder for the Foundation to support).

3 Likes

Hi @boredelon,

Your topic will be automatically closing in less than 24 hours. Are you content with the feedback received, or do you wish to extend community discussion for a further 7 days?

If we do not hear from you within 48 hours after your topic closes, your topic will be moved straight to the AIP Draft process.

We look forward to hearing from you.

- river

2 Likes

Thank you @river! It appears enough feedback has been provided. There’s still no clear resolution around the Rari situation, so I think it’s appropriate to move forward into the draft process.

2 Likes

This topic was automatically closed after 7 days. New replies are no longer allowed.

Thank you @boredelon for your ideas and the ApeCoin DAO community for the thoughtful discussions. A moderator will get in touch with the author to draft the AIP in the appropriate template. Once the AIP is drafted and meets all the DAO-approved guidelines, the proposal will be posted on Snapshot for live official voting at: Snapshot

Follow this Topic as further updates will be posted here in the comments. @boredelon please see your messages for the next steps.

- river

1 Like

Hi ApeCoin DAO Community,

@boredelon has completed editing their AIP Idea to be their AIP Draft.

Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-Pearson

2 Likes

Hi ApeCoin DAO Community,

Our team has reviewed and discussed @boredelon’s AIP Draft and have sent a list of initial questions. We await answers.

Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-Pearson

1 Like