Yet another saga across the decentralized finance (DeFi) field as Uniswap-fueled, DeFi Education fund liquidates half its donation to stablecoins. Several complaints on the now-passed 1 million UNI fund have seen several crypto influencers question the “decentralization aspect” of the world’s largest decentralized exchange, Uniswap.
It all started back at the end of May when Harvard Law Blockchain and Fintech Initiative, a student organization dedicated to growing blockchain in the university, raised a governance proposal to create an educational fund with 1 million to 1.5 million UNI to support decentralized finance efforts and lobby efforts for laws and regulations on DeFi.
“We should create and fund with 1-1.5M UNI a community-overseen organization that would finance existing and new political groups engaged in crypto policy/lobbying,” the proposal reads.
The proposal was successfully voted for earlier this month, and the funds were transferred to the DeFi Education fund.
A fair voting process?
Despite aiming for the best in the DeFi community, the voting process has come under huge scrutiny as several top crypto heads questioned the “decentralized voting” that took place last month. Chris Blec, one of the most critical voices in DeFi, opposed the voting on principle to “disgusting D.C. lobbying”, which shows Uniswap is not decentralized.
First, Blec complained that the voting tokens are centralized to a few of the top influencers of Uniswap. Over 21.2% of the total UNI tokens are controlled by the team and a further 18% of the tokens by early VC investors such as Andreessen Horowitz, also known as A16z.
The VC controls more tokens than the voting threshold of the proposal – 40 million UNI. However, the VC firm delegated its votes to several blockchain-focused projects and institutions – Harvard Law Blockchain and Fintech Initiative being one of them. Could they have been behind the lobbying fund proposal to benefit its portfolio of DeFi investments?
“If Andreessen Horowitz wants to take $40 million out of the Treasury to fund this committee because it’s going to help their corporate interests, then that should be known,” Blec stated. “That shouldn’t be a secret, you know, so that’s what I really try to pursue with this stuff.”
Fund sells over $10 million in UNI
The involvement of a16z is only a part of the story, however. On Tuesday, July 13, 2021, the DeFi Education fund announced they had liquidated half of the 1 million UNI to USDC as soon as it hit their accounts, raising questions.
With the help of @GenesisTrading, we sold 500k UNI for ~$10.2M USDC in order to fund the efforts of the Defi Education Fund.
In the next 24 hours, we will be sending 500k UNI to Genesis and receiving ~$10.2M USDC in return.
— Defi Education Fund (@fund_defi) July 12, 2021
However, Crypto researcher and journalist, Igor Igamberdiev, uncovered that one of the voting delegates, Larry Sukernik, sold a significant amount of UNI before the DeFi Education Fund liquidated 500k UNI tokens – raising insider trading questions.
Looks like Larry Sukernik, one of the multi signers behind the $20M DeFi education fund, dumped UNI five hours before the $10M OTC sale. pic.twitter.com/JWlxZC2L4Q
— Igor Igamberdiev (@FrankResearcher) July 13, 2021
Larry swapped $50k worth of UNI tokens on Uniswap V3 five hours before the fund liquidated its $10 million UNI via OTC on Genesis Trading.
Despite the on-chain transactions, Larry defended himself claiming they “do not tell the full story”. According to Larry’s tweet, the UNI he sold off was out of his own address – which he claims is a grant made to send USDC to other people. While he is yet to distribute this amount, Larry stated the amount is not in any way connected to the DeFi Education Fund and promised to distribute the tokens in due time.
Responding to Igor’s discovery, Larry tweeted,
“On-chain history doesn’t tell the full story: First, The UNI I sold out of my address was from a grant a group of us received a few weeks back. *Just* noticed we received it so sold it for USDC to send it to people. Additionally, the UNI for DEF was already sold by the time of the above sale.”