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DeFi Dark Web Report Rekt: Uncovering the Sushi Scandal, Did DAO Ultimately Lose to Human Nature?

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DeFi Dark Web Report Rekt: Uncovering the Sushi Scandal, Did DAO Ultimately Lose to Human Nature?

On November 25th, AG, the Asia Pacific head of Sushi, stated, "Sushi has unfortunately failed, and I hope that those harmful to the organization will be identified and removed. When you begin to lose confidence in a project, you will never want to work for it. Things have changed. Sushi is no longer a community-driven project but a company called 'JORKN'." Shortly after, she resigned, with the official statement from Sushi only mentioning that AG's remarks were subjective.

On December 6th, an exposé by "Rekt", known as the DeFi dark web, uncovered internal issues within Sushi. The following is a summary of the report.

Updated on 12/9: Chief Technology Officer Joseph Delong announces resignation. Click for the segment.

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Review of AG's Statements

Sushi's Asia Pacific head, AG, posted statements indicating that JORKN refers to Joseph, Omakase, Rachel, Keno, and Nori as the five core members. AG mentioned that approval from Joseph, Omakase, Rachel, or Nori is required before hiring anyone. Some community builders have even been ousted by Joseph, leaving no room for genuine community builders. AG stated, "We are like a company. We can decide things for ourselves." One of their criteria for selecting individuals is whether the person will comply and be loyal to them.

She continued by stating that many of the people they have chosen lack a good background and even cryptocurrency experience. As for why former core leader Maki left and why they wanted Maki to leave? "Power, fame, and money," she said.

AG mentioned, "Chief Technology Officer Joseph only tweets but does not write code, and is only interested in receiving bonus rewards. Omakase leads development and is a smooth talker. However, his product will eventually prove itself. I won't comment further." AG mentioned that another developer, Keno, has not written any code for three months, even though he is still employed. And PM Rachel is trying to control everything, driving out former core developer Maki to give the aforementioned four more bonus rewards, which was her idea. She also earns quick money from other projects. Nori handles security, and AG mentioned that she has no idea when he started controlling personnel, but it may be to consolidate power.

AG expressed disappointment: "Completely clueless, can't figure it out, very disappointed in Sushi's transformation. No one cares about building, community, and vision anymore."

Rekt Provides Evidence to Reconstruct Events for Community Self-assessment

Rekt stated that this report collected evidence from on-chain and off-chain sources, as well as testimonies from relevant individuals, to provide the public with the truth to judge the events.

Event One: Former Core Leader Maki's Non-voluntary Resignation Initiated by CTO Joseph

On 9/18, core developer Maki announced stepping down to become an advisor; on 11/24, he stated that he had joined Tokemak.

Evidence gathered by Rekt shows that Maki did not resign voluntarily but was voted out by 17 core developers on 9/9, with 11 voting in favor, leading to Maki leaving the Sushi core team to become an advisor.

According to multiple sources, Sushi has formed an internal power group consisting of Joseph Delong, Omakase, Keno, and Rachel. The situation Maki faced was that if he did not resign voluntarily - as he was the only member with a three-year contract and could not be terminated - six other developers would resign, causing Sushi's product Trident to not be launched.

However, despite being touted as highly community-governed, Sushi did not involve the community.

Internal vote pressuring Maki source: Rekt:

Denial of self-resignation conversation source: Rekt:

Event Two: Misuse of Funds

After Maki stepped down, during the NFT NYC event, Sushi Partners spent $9,000 on a dinner event without reporting to the DAO. Joseph, Rachel, and Keno spent $5,000 to attend a VC mixer event but failed to raise funds successfully.

Event Three: BitDAO Profit-sharing Dispute

It is alleged that after the MISO IDO, BitDAO insisted on distributing 2.6% of token circulation bonuses to the Sushi core team, but Maki believed it should be distributed to xSUSHI holders. The resolution was eventually to split it equally between the core team and Maki. However, this money never made it into the pockets of xSUSHI holders due to compliance issues.

In the distribution among the core team, Joseph, Omakase, Keno, Rachel, and Maki's share was much larger than other team members. Omakase claimed this was at Maki's behest, but Rekt stated it was actually Rachel's doing, and Maki later returned this bonus. Not only that, during the BitDAO IDO, there were errors, and the security issues with the MISO platform made team members doubt the suitability of CTO Joseph.

Event Four: Shocking Insights into the Core Team Group

Rekt infiltrated the Sushi core team's Telegram discussion group, which was reportedly public for some time. The following votes were discovered:

After the BitDAO fundraising, a discussion on whether to dismiss Rachel resulted in a negative outcome

Omakase privately misused public funds, with a discussion on whether to dismiss him resulting in a negative outcome

Event Five: Using Team Funds for Trading

According to Rekt's investigation, a core member traded with team funds to personal accounts without consent. When he received tokens from the BitDAO IDO, he only informed other members that it was a shared fund for buying NFTs.

During the recent theft at CREAM Finance, this member informed others that he lost 111,591 SUSHI, valued at approximately $1.2 million. He even tried to compensate for his loss from the team's multi-sig wallet, supported by Rachel, but was ultimately rejected.

Event Six: AG Fired for Whistleblowing

Following AG's expression of dissatisfaction with specific Sushi members in the community, a vote was quickly initiated in the core group, resulting in her removal from the team.

CTO Joseph responded to Rekt, stating that everything was a disgruntled ex-employee's vindictive retaliation, emphasizing zero tolerance for defamation of Sushi, but did not address the accusations. Subsequently, an official document explained why AG was dismissed, citing her unsuitability.

Joseph believes Sushi should face the "harsh reality," that is, it should move towards the Uniswap model, become a legitimate entity with a more formal structure and natural hierarchy. However, he also complained on social media about wanting to resign and used emotional language attacks.

Is DAO Feasible at the Core?

As of the deadline, SushiSwap remains a prominent DEX protocol with a large amount of funds. However, this protocol, which emphasizes community governance and high decentralization, as shown by the Phantom Troupe incident and Omakase's statements, may not be as ideal as people imagine.

Rekt commented, "This is a story that reflects reality. Large decentralized autonomous organizations (DAOs) are closer to regular companies than we would like to believe. Even if they are not integrated offline, human nature means power will accumulate in those who seek it. This phenomenon does not always yield good results, with hierarchies, highs, lows, and egos appearing in this DAO."

Conflicts will eventually end, and Sushi will not wither away, but who will resolve all this remains to be seen. Currently, the major investor Arca, who strongly supports Sushi, is proposing a restructuring proposal for Sushi DAO, which Maki also supports.

12/9: CTO Joseph Delong Announces Resignation

A few days after Rekt's revelations, Chief Technology Officer Joseph Delong announced his immediate resignation from the role of CTO, expressing regret.

He stated that the chaos was difficult to clarify, and if the DAO does not undergo a radical structural transformation, many problems will still exist. Joseph highly recommends setting up senior management positions outside the DAO to effectively manage the team. He believes caution should be exercised with anyone in the current team who claims to succeed in leadership.

Delong is a long-time code contributor to Ethereum and Web 3. He has worked at ConsenSys, MolochDAO, and contributed to the Flow blockchain. Upon announcing his resignation, Joseph Delong also posted a manifesto to Sushi's multi-sig wallet.