Compound Labs Accidentally Gave Away $162 Million of Its COMP Token

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Compound Labs accidentally gave away roughly $162 million worth of its COMP token after it pushed a bugged update to its comptroller logic on September 29. Now its founder, Robert Leshner, is counting on the decentralized finance platform's users returning the misbegotten tokens to the Compound Timelock contract.

The problem started with a change introduced as Proposal 62, which introduced "two different COMP distribution rates for each and every market - borrow-side (compBorrowSpeeds) rate and supply-side (compSupplySpeeds) rate" in an effort to address "undesirable market conditions" caused by the previous setup.

Proposal 62 was created on September 21 and implemented on September 29. But it didn't take long for Compound Labs to realize there was a problem with the new comptroller logic. Leshner originally thought the issue was limited to about 280,000 COMP tokens that were worth approximately $92.6 million at the time.

Compound Labs already had a problem. Leshner then made it worse by tweeting:

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Hot Hardware reported that social media users were furious about Leshner's threat to reveal their identities to the IRS. Many are drawn to decentralized finance because of its supposed privacy benefits; now they're being threatened because Compound Labs made a mistake to a core aspect of its platform? That isn't a good look.

Leshner apologized for that tweet:

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Now the efforts to encourage COMP token holders to return some of their accidental windfall have shifted to offering NFTs, Leshner thanking individual users, and introducing Proposal 64 to fix the logic errors introduced with Proposal 62. It wouldn't be a surprise if Compound's users respond more favorably to those tactics.

So far as keeping the COMP tokens goes: head of tax strategy Shehan Chandrasekera told CNBC that, at least in the U.S., the account holder will be in the clear as long as they report the tokens' value as income. They aren't required to return the tokens; they're just required to pay the appropriate taxes on them.

Nathaniel Mott
Freelance News & Features Writer

Nathaniel Mott is a freelance news and features writer for Tom's Hardware US, covering breaking news, security, and the silliest aspects of the tech industry.