Across Protocol Co-Founder Denies $23 Million Fund Misuse Allegations

Hart Lambur, the co-founder of Across Protocol and Risk Labs, has strongly refuted allegations of misappropriating funds, asserting that the claims are false and driven by competitors. The controversy revolves around accusations that the founders of Across Protocol manipulated the decentralized autonomous organization (DAO) governance process to divert approximately $23 million in funds to their for-profit company, Risk Labs. The allegations were made by Ogle, the pseudonymous founder of a layer 1 project and an onchain sleuth, who described the project as a "DAO in name only," suggesting that it does not operate as a true decentralized organization.

Lambur, in his defense, stated that Risk Labs is a Cayman Islands-based nonprofit with no shareholders and operates under fiduciary obligations. He shared a certificate of incorporation to support his claim, asserting that if the funds were misused, the directors, including himself, could be sued. However, the nonprofit status of Risk Labs has been called into question. While the company's certificate of incorporation describes it as a "foundation company," law firms explained that such firms can have any purpose, whether commercial, charitable, or private. The nonprofit status of Risk Labs could not be verified, as its name was not included in the list of registered nonprofit organizations. Cayman Islands-based foundations are generally regarded as "ownerless" entities and are not permitted to pay dividends. However, for-profit foundation companies in the Cayman Islands allow distributions to beneficiaries rather than to shareholders.

Ogle alleged that the co-founders and insiders of Across/Risk orchestrated governance proposals to secretly subvert the democratic process of the DAO and extract approximately $23 million from the treasury. The first DAO proposal, approved two years ago, saw 13.1 million worth of tokenholders voting in favor, approving the proposal with over 97% of the vote. The second DAO proposal, a year later, saw Risk Labs ask the DAO for 50 million ACX tokens for "retroactive funding." Ogle claimed that the team's votes were crucial for the proposal to reach quorum and pass. He also noted that the proposal did not guarantee the money would be used for Across, and there were no formal agreements between the two companies. Onchain analysis revealed that many Risk Labs team members covertly approved the proposal, with the second-largest voting wallet initially funded by Hart Lambur.

Lambur denied the accusations, stating that the token has been live for almost three years and team members have acquired it with their own funds. He confirmed that Chan voted for the proposal but denied the secret nature of the addresses used, noting that they are publicly disclosed and linked. Lambur described all allegations as "categorically untrue" and criticized Ogle for anonymity and potential conflicts of interest, highlighting Ogle's connections to competing projects. Lambur also mentioned that the founder of a competing project retweeted Ogle's post almost immediately after it was posted.

This controversy highlights the challenges and complexities of decentralized governance and the potential for misuse of funds within DAOs. The allegations against Across Protocol DAO raise questions about the transparency and accountability of decentralized organizations and the need for robust governance mechanisms to prevent such incidents. The situation underscores the importance of independent verification and oversight in ensuring that DAOs operate in the best interests of their stakeholders.

The market reaction to these allegations included a drop in the ACX token price. Lambur's public statements clarified his $100,000 salary and absence of token rewards, stressing nonprofit adherence. The community responded with mixed opinions, ranging from support for the accused leadership to advocacy for a comprehensive audit. Lambur asserted, "The team can freely use purchased tokens for proposals, similar to other DAOs." Ogle stands firm on his claims, contributing to a broader debate over insider advantages within DAOs.

Insights emphasize the necessity for DAOs to implement clear governance frameworks. Transparency and regulatory alignment could prevent further market volatility and bolster trust in governance practices. The controversy surrounding Across Protocol serves as a cautionary tale for the broader DAO community, highlighting the need for stringent governance and oversight to maintain trust and integrity within decentralized organizations.