Fei Flips Again, Repays Crypto Hack Victims

After months of mixed signals, victims of the $80 million Fei Protocol hack have finally been made whole.

Fei’s repayment plan — rolled out this week — caps off a chaotic last few months. The protocol first voted to repay victims of the hack, before changing course and only offering partial reimbursement. Following backlash, Fei’s DAO finally voted to fully recoup victims.

Olympus DAO, which lost $9 million in the April hack, cast an overwhelming 93 million of the 99 million votes in favor. The vote was one of the last governance decisions Fei’s Tribe DAO will make before being wound down. 

Months before the Fuse lending protocol hack, Fei merged with lending protocol Rari Capital. The partnership hinted at things to come in terms of Fei’s insider governance.

“The way [the Fei-Rari merger] was structured was pretty brutal for anyone who was not a majority controlling shareholder,” DeFi researcher Luca Prosperi said.

After the newly-merged Fei was hacked in April, the Tribe DAO passed a Snapshot vote to make hack victims whole. Fei then held a contentious second vote that sided against full repayment and said it would wind down Tribe. 

Fei then proposed a plan that would recoup less than 10% of the losses sustained by major Fei investors, such as Frax Finance and Olympus DAO. Sam Kazemian, the CEO of Frax, called the protocol’s actions fraud. Fei’s team maintains it did nothing wrong.

“This is the most important fact to clear up,” Fei’s founder Joey Santoro told Blockworks. “The initial vote was a snapshot signaling poll which was non-binding.”

The second poll, which was on-chain and binding, was the poll that actually mattered, according to Santoro. Fei does not see the April hack as its own liability, as the hacked Fuse Protocol was run by Rari, which is still under a different team from Fei — despite the merger. 

Fei’s hand-waving surrounding its post-hack votes illustrate how DAOs are not always permissionless, with insider developer teams sometimes controlling governance decisions and making centralized decisions behind the scenes.

“Ultimately when shit hits the fan and it’s about money, there is no protection,” Prosperi said. “It’s back to rule of the jungle.”

Fortunately for victims of the Fei hack, Fei’s team decided not to press its advantage. After Fei faced a firestorm for its proposed partial repayment plan, another Snapshot vote passed supporting full repayment, and a fourth vote, passed and executed Monday, returned the lost funds.

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