Blackmail thwarts $90K ‘hostile governance attack’ on DAO

An exploiter tried to drain funds from Indexed Finance DAO but was caught after refusing to share the funds with a blackmailer

article-image

Dall-e modified by Blockworks

share

Blackmail was all that stood between the remaining funds in Indexed Finance’s crypto treasury and a devastating governance token attack.

When a watcher of the neglected Indexed Finance DAO noticed a malicious proposal meant to drain the DAO’s remaining $90,000, they demanded a share of the proposer’s profits to avoid outing the exploiter.

The proposer apparently declined, leading the blackmailer to alert former Indexed contributor Laurence Day, who then told his 30,000 followers on social media platform X of the attack. 

Hours later, the governance proposal was narrowly defeated.

Indexed Finance launched in 2020 as an index fund for crypto but has seen activity mostly end in the time since a 2021 flash loan attack drained $15.8 million from the DAO’s coffers. 

Since the attack, Day and developer Dillon Kellar stopped working on the protocol, and before last week, Indexed governance hadn’t seen a vote since mid-2022 when the treasury was recouping investor losses and funding a class-action lawsuit.  

But in DeFi, protocols remain operational regardless of whether users exist. And as Indexed’s NDX governance token slid to a fraction of a cent, someone spied an opportunity.

400,000 NDX ($4,000 at the time) was needed to reach a governance quorum and pass a proposal. The exploiter made a nameless proposal with a two-day voting window containing code to drain Indexed’s depleted-but-still-existent treasury — containing some $92,000, per DeepDAO.

With the required NDX, the exploiter reached a quorum of votes in favor. 

In the proposal’s waning hours, Day, the former Indexed contributor, learned of the exploit and made a plea to his followers on X.

“In keeping with the principle of ‘no, you shouldn’t get to raid the protocols of inactively developed projects for profit by leveraging governance’, I’d appreciate it if anyone who still happens to hold NDX that is delegated to themselves or another wallet they control to vote Against,” Day wrote.

“Against” votes flowed in and the proposal was defeated by a margin of about $90 in NDX.

Day alleges the person who tipped him off to the attack had first blackmailed the exploiter asking for 40% of the funds. On-chain sleuth ZachXBT linked the wallet address of the attempted exploit to a second attack on an inactive crypto project earlier this month.

Attacks on the treasuries of decrepit DAOs are becoming more common as failed projects accumulate but immutable code keeps funds sitting on-chain. A Solana-based DAO was exploited for $230,000 last month when a malicious proposal went unnoticed.

“The unintended side effect of having code governed by token holders that executes forever is that there [are] typically no plans for end of life,” Jeremiah Smith, CEO of DeFi security service OpenCover, said in a Telegram message. “The ‘space trash’ problem of onchain applications has only begun.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Unlocked by Template (7).png

Research

Union’s improvements upon Tendermint consensus through CometBLS, coupled with ZK proving through Galois, allow for a broadly scalable, cost efficient, and low latency IBC implementation that is feasibly scalable across every existing blockchain, virtual machine and runtime. The implementation offers modular crosschain interoperability without the need for trusted intermediaries.  

article-image

Ubisoft could let Champions Tactics players move their NFTs and tokens to another chain

article-image

Long before Ordinals, bitcoin gambling site SatoshiDice was blamed for spamming the chain

article-image

Néstor Palao spoke to Blockworks about the trends he’s seeing in crypto projects

article-image

Axiom merges Solana memecoins with Hyperliquid perps

article-image

Sponsored

Technology alone isn’t enough. It’s about how we introduce it, how we guide users through it, and how we make it feel like second nature.