You shouldn’t put all your eggs in one basket, especially when that basket happens to be an unaudited DeFi project with an anonymous founder. Many people invested in the DeFi token “Sushi” only to have the rug pulled on them by Sushi Token’s anonymous founder “Chef Nomi.”
On September 5, Chef Nomi reportedly took 37,400 ETH (roughly $13,808,454 at press time) allocated to the Sushi Token development fund and liquidated it to his personal wallet. In an odd turn of events, however, Chef Nomi returned the money he previously liquidated, sending 38,000 ETH to the Sushi Token treasury.
To everyone. I fucked up. And I am sorry.
— Chef Nomi #SushiSwap (@NomiChef) September 11, 2020
I have returned all the $14M worth of ETH back to the treasury. And I will let the community decide how much I deserve as the original creator of SushiSwap. In any currency (ETH/SUSHI/etc). With any lockup schedule you wish.https://t.co/QwFj5SeeuQ
— Chef Nomi #SushiSwap (@NomiChef) September 11, 2020
What happened
There’s a good chance that Chef Nomi returned the money to the treasury because Sushi Token investors were advised to lawyer up after the development fund money was liquidated.
https://twitter.com/prestonjbyrne/status/1302610570122792962
“In the case of SushiSwap, there are clearly steep losses across the market, and likely one source available for recovery, chiefly, ‘Chef Nomi,’” said lawyer Preston Byrne. “There is only one legitimate way to access those funds, and that is by winning a lawsuit.”
It appears that Chef Nomi returned the funds out of fear of law enforcement giving him a harsh prison sentence, and because the Sushi Token community accosted him for liquidating a portion of the dev fund. After Chef Nomi liquidated on September 5, the price of Sushi Token plummeted from $4.44 to $1.20 per token, a whopping 73% decrease.
After returning the money, Chef Nomi took to Twitter, profusely apologizing for his actions and saying he will still play a role in the greater discussion around Sushi Token and it’s technicalities, but that he will no longer play a role in the governance of Sushi.
What’s next?
The fate of Sushi protocol is now in the hands of FTX CEO Sam Bankman-Fried.
1) Now that the Sushi key has been transferred, it's time to transfer control to a multisig of myself and Larry Ce…
Just kidding. Here's the actual plan (https://t.co/vx6B5QImS6)
— SBF (@SBF_FTX) September 6, 2020
After Chef Nomi liquidated the dev fund on September 5, he transferred control of the project to Bankman-Fried–but does it matter?
Although the price of Sushi Token has partially recovered, the liquidation fiasco caused many individuals to lose hope in DeFi projects and even contributed to somewhat of a crash in the DeFi ecosystem.
When the dev fund liquidation happened on September 5, the total value locked in DeFi protocols was roughly $8 billion. After Chef Nomi liquidated, many DeFi tokens crashed, and the total value locked in DeFi protocols fell to $6.14 billion—a 25% decrease that was kicked off by the Sushi Token liquidation.
As always, we advise you to proceed with caution when it comes to DeFi projects. DeFi is a perpetual Ponzi Scheme that has sent the transaction fees on Ethereum skyrocketing and caused a bottleneck in the ETH network. No value is created on DeFi platforms but investors flock to them because they have been told they can make a quick buck by investing in DeFi. But as you see with Sushi Protocol, one of the most popular DeFi projects, DeFi is a house of cards that can crash at any moment.
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