Across Protocol Faces $23 Million Misappropriation Allegations, ACX Token Drops 11.63%

Across Protocol, an Ethereum-based cross-chain bridge protocol, is currently facing allegations of fund misappropriation. On June 27, claims surfaced accusing the protocol's team of misusing approximately $23 million from their Decentralized Autonomous Organization (DAO) treasury. The allegations suggest that the team manipulated governance votes to transfer funds to Risk Labs, a private for-profit company founded by the same individuals behind Across Protocol.

The controversy was brought to light by Ogle, the founder of Glue Net and an advisor to World Liberty Financial. Ogle asserted that the Across Protocol team orchestrated the transfer of 150 million ACX tokens, valued at $23 million, to Risk Labs under the guise of "strategic investment" and "retroactive funding." According to Ogle's analysis, the protocol's co-founders and insiders allegedly manipulated governance proposals to extract tokens from the treasury, bypassing the DAO's democratic decision-making process.

The allegations center on two separate governance proposals. In October 2023, Kevin Chan, the treasurer of Risk Labs, submitted a proposal requesting the transfer of 100 million ACX tokens (approximately $13.5 million) from the DAO to Risk Labs. The proposal was presented as a strategic investment, with assurances that the tokens would not be sold for two years. However, blockchain analysis allegedly revealed coordinated insider voting, with Chan casting a significant "yes" vote from a separate wallet traced back to him. Team member Reinis FRP and founder Hart Lambur were also implicated in the voting effort.

A year later, the team requested another $7.5 million in "retroactive funding." Chan's secret wallets again accounted for a substantial portion of the "yes" votes. This second proposal raised additional concerns when team members disclosed in discussion forums that they had been selling token option agreements to "strategic investors" using tokens from the first proposal, effectively monetizing rights to the tokens before the two-year holding period expired.

Hart Lambur, the CEO of Across Protocol, has categorically denied the allegations, stating that the team has not extracted value from the DAO. Lambur emphasized his team's commitment to ethical practices and long-term building in the cryptocurrency space. Despite the denials, the allegations have resonated within the cryptocurrency community, with some founders and investors supporting Ogle's claims and calling for further investigations into similar practices at other DAOs.

The controversy has had a significant impact on ACX token holders, with the token declining 11.63% on the day the allegations surfaced. Currently trading at $0.1355, ACX has lost nearly all its value from its $1.74 all-time high reached seven months ago. The pattern of value loss is reminiscent of recent incidents in the space, where similar allegations of insider misconduct have led to substantial market capitalization erosion.

Lambur's denial comes amid allegations that $23 million in ACX tokens were misallocated. This controversy has implications for DeFi governance, possibly affecting investor confidence in similar projects. Key players include Lambur and the pseudonymous figure Ogle, who accuses the team of insider trading. Ogle previously faced similar accusations in the DeFi space. Both parties have taken to social media to present their case.

The ACX token suffered a 10% drop following the allegations. Concerns over the transparency of the DeFi governance have risen, affecting investor sentiment. These events could lead to increased scrutiny for DeFi projects. Financial implications include a significant drop in ACX token value and community demands for accountability. Market reactions highlight the need for robust governance structures in DeFi to prevent such incidents from recurring in the future.

The regulatory implications remain unclear. However, these events could lead regulators to scrutinize DeFi projects more intensely. Lambur's denial and subsequent market reactions underscore the volatility and challenges within DeFi governance, while potential regulatory responses remain speculative.