Ethena, an Ethereum-based protocol, was accused of using its own funds to generate rewards in its staking events.
Ethereum-based synthetic dollar protocol has been accused of misusing its funds to profit from its staking events, thereby diluting users’ profits for the team’s profits. The Ethena team allegedly staked 180 million Ethena (ENA) tokens in season 3 of its farming event to capitalize on rewards.
The allegation was brought by X user Nomad, who posted, “The Ethena team is currently using 180M ENA tokens (25% of SENA supply that earns sats) to farm sats in Season 3, effectively diluting other participants’ rewards.” They further questioned the team’s ethics because of wanting to profit through an event that is meant to benefit its users.
They broke down the allegation by judging the flow of ENA tokens from the project’s cold wallets. Nomad tracked the staked assets back to a wallet that Ethena used to store over 3 billion ENA. That wallet is provided by Coinbase via the Coinbase Prime offering. “It’s reasonable to believe this is the Coinbase prime custody address for locked ENA tokens for the Ethena Labs core team and Ethena Foundation,” Nomad explained. The 3 billion ENA surpassed the amount of tokens in circulation based on Ethena’s vesting schedule.
That address moved 180 million ENA across six wallets on October 3—the day the staking activity launched. Those wallets also appear on Ethena’s staking leaderboard, which shows the amount of sats generated by staked ENA (SENA). Beyond that, Nomad mentioned that these wallets are also earning Ethereal points, with Ethereal being a decentralized exchange (DEX) that partnered with Ethena to launch later this year. “Ethena team’s SENA currently accrued 20% of the total Ethereal points.”
Nomad doubled down on the team’s ethics being compromised, highlighting the project’s community call in which users raised questions about the same issue. However, Ethena’s decision-makers chose to ignore it. “During Ethena’s first community call, this was the highest voted question, but the Ethena team chose to completely ignore it, which speaks volumes about the team’s ethics and attitude.”
They also called Ethena out for changing the rules of the previous farming seasons as the event was occurring, forcing users to stake more of their tokens. Nomad threw light on how users interacting with season 2 suffered massive losses due to the team asking them to lock more tokens to earn rewards.
Ethena Responds
Ethena Labs responded with a statement, mentioning that the ENA staked from its wallets belonged to Ethena Foundation, a non-profit dedicated to Ethena’s development. The post mentioned how these tokens were unlocked, so eligible to be staked. However, despite being staked, the tokens do not earn rewards, in the form of sats or Ethereal points.
