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ParaSpace internal turmoil: Team takes urgent action to ensure fund security

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ParaSpace internal turmoil: Team takes urgent action to ensure fund security

Recently on 5/10, a turmoil erupted within the NFTFi protocol ParaSpace, attracting market attention. Through blockchain analysis, ParaSpace's internal team discovered that out of the 2,909 ETH recovered from the hacker attack on March 18, not all funds were returned to users, with over half of the funds flowing out to unknown wallets, centralized exchanges, and other addresses such as Circle redemptions. This article reflects the team's statements excluding CEO Yubo Ruan.

Another perspective: CEO and CTO Yubo Ruan's live interview

ParaSpace Team: CEO Yubo Controls All Funds

The ParaSpace team revealed that all funds of the protocol, including all on-chain and off-chain funds, are solely controlled and managed by CEO and CTO Yubo Ruan, and the team does not have access to or manage the finances of the protocol. Recently, as the team began registering ParaSpace as a legal entity, they requested access to review these financial records, but received delayed and vague responses from Yubo.

Through blockchain analysis, team members discovered that user funds of ParaSpace are managed in a user contract owned by an EOA wallet (0x909...) which holds the names ruanyubo.eth and paraspaceinsurance.eth (actually redirecting to yubo.eth). Furthermore, the activities of 0x909 are unrelated to ParaSpace Insurance, with funds flowing out to yubo.eth.

ParaSpace Urgently Removes CEO's Control

The team took emergency action to ensure multisig of the protocol, removing Yubo and any addresses not directly controlled by the team, adding 2 team member addresses, increasing the required signatories from 2 to 4 out of 5, and removing Yubo's access from the emergency management role of the protocol, and any addresses not directly controlled by the team. The team emphasized that all user funds and assets are safe: Yubo cannot access them.

Additionally, the team requested Yubo to remove user funds directly from the user contract managed by 0x909, transfer them to ParaSpace multisig, and hand over management control and access to all operational services, stepping down as CEO and CTO. However, Yubo refused to comply with the team's requests, avoided contact with the team, and publicly released information that does not align with evidence on the blockchain or the current status of the team and protocol. The team stated that they will stand united against any messages or activities that could jeopardize the stability of the protocol and user funds.

ParaSpace Statement: Financially Sound

The ParaSpace team emphasized that they have the ability to directly fill the funding gap in the treasury without significantly impacting the platform's financial stability. However, the risks posed by these actions, harm to the community, and violation of the responsibility to safeguard and properly manage user assets are issues the team must address immediately.

They expressed regret for not identifying this issue sooner but remain committed to protecting the platform and users from any consequences that may arise from Yubo's activities.

The ParaSpace team pledged full transparency, arranging a livestream to share their understanding of the situation, recovery status, and updates on the current situation. Additionally, they will set up Calendly to provide a 24-hour open communication channel for users to directly contact the team.

The co-founders of ParaSpace pointed out that their top priority is to swiftly and effectively resolve this situation and are dedicated to moving forward in a way that strengthens and enhances the strength and resilience of the ParaSpace community.

ParaSpace is one of the largest NFTFi protocols and has recently performed well in the DeFi market, attracting the attention of many investors. However, this internal turmoil has affected its image and reputation. The incident has also raised concerns about the security and transparency of DeFi protocols, which may impact the direction of the entire DeFi industry's development.

The ParaSpace team stated that they will continue to work towards resolving issues, enhancing transparency, maintaining community stability, and following best practices in future development to protect user interests and market confidence.

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