Compound DAO faces calls for more oversight amid conflict of interest claims

By admin On Mar 11, 2025

Decentralized finance (DeFi) lending platform Compound is facing calls to onboard additional risk managers in response to a recently approved governance proposal made by current manager Gauntlet.

Throwing its hat into the ring as a potential candidate, Chainrisk is calling for more transparency amongst COMP delegates and their negotiations, with a reply even pointing to an unlabeled address that may be linked to Gauntlet.

In what DeFi commentator Togbe is calling “some of the griftiest stuff I’ve ever seen from Gauntlet,” Gauntlet’s proposal is for Compound to use competitor Morpho (for which Gauntlet is also a service provider) to launch new markets on the Polygon network.

Gauntlet, however, presents the move as a win-win-win for Compound, Morpho, and Polygon, a way to capitalize on a potential gap in the market following a cooling off of relations between Polygon and Aave, DeFi’s biggest lending platform.

Aave, which represents over a third of Polygon’s total value locked (TVL), according to DeFiLlama, threatened to leave the network in response to a controversial proposal to use bridge funds for yield farming, also via Morpho.

Aave governance delegate Marc Zeller took to X to highlight the perceived conflict of interest in the proposal, characterizing the proposal as “subsidiz[ing] a competitor’s growth that’s been eroding their market share every quarter.”

He also offered to wager $50,000 on whether the move would prove to be a winning outcome for COMP holders.

However, Gauntlet has defended the proposal, citing issues such as “ongoing lawsuits, Labs hands tied, market share eroding” as reasons for such a move, as well as stressing the proposal is not self-serving in highlighting the fee structure, and the fact that Gauntlet’s Morpho earnings are already capped.

While Gauntlet’s proposal states that “Compound DAO will be the sole owner of the vaults and will accrue all revenue generated during the joint incentives trial program,” it adds that, in future, and subject to DAO approval, “Gauntlet may introduce a fee-splitter contract as revenue share for the work Gauntlet performs as the vaults’ Curator.”

Gauntlet’s Vice President of Growth, Nick Cannon, has hit back at criticism on X, which he calls “approved comms” from a “worried” Aave camp, also claiming that Gauntlet was censored during its time at Aave.

Polygon Labs’ CEO also claims that Aave pressured teams during governance votes.

This is not the first time that Gauntlet, Aave, and Morpho have come into conflict. Aside from the recent “Polygon(e)” controversy, tensions flared last year when Gauntlet walked away from its role at Aave and began working with Morpho.

Shortly after, the protocols argued over their respective approaches to risk when users were liquidated during a depeg of Renzo’s ezETH.

While the spat may seem to be nothing more than two sets of former colleagues bickering on the timeline, maintaining healthy and functional DAO governance processes is a serious business.

Multiple precedents have been set by a lack of attention to DAO voting, such as the $25 million governance “attack” suffered by Compound last July. Previously, in 2022, Compound’s $830 million ether (ETH) market was bricked for a week when a proposal had unintended consequences.

Elsewhere, Maker DAO made emergency changes to borrowing restrictions in response to rumors of a takeover plot just last month.

DeFi doom and gloom

The latest crypto sell-off continues to pile on the pressure in DeFi; the sector has seen TVL plunge by over a third, down from its recent peak of $138 billion on December 17 to just under $88 billion today.

Even those pulling the strings were left out of pocket, as the Donald Trump-backed World Liberty Financial is reportedly down bad, cursing ETH just like everyone else.

As financial markets took a nosedive yesterday, the wider crypto ecosystem racked up almost $900 million worth of liquidations, according to data from Coinglass.

Meanwhile, over in DeFi, users monitored one whale’s dicey 65,000 ETH ($123 million) position with bated breath, fearing its liquidation could cause an on-chain cascade.

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