Sushiswap, a fork of popular DeFi protocol Uniswap, has enjoyed unparalleled hype in its first week and a half. The protocol already has $1.27 billion locked in Sushi contracts, according to DeFi Pulse.
The project, founded by a pseudonymous founder, Chef Nomi, rose to prominence with the promise of rewarding investors for providing liquidity through a liquidity provider token (LP), dubbed sushi (SUSHI).
The new DeFi protocol intended to integrate the best features of UniSwap and create a community-oriented governance platform where users could vote on the development of the project.
SUSHI tokens quickly became a favorite within the DeFi space, hitting a peak market cap of $278M just four days after the protocol launched.
Despite concerns that the project was unaudited and could be vulnerable to security flaws, yield farmers poured in billions worth of assets into Sushiswap with the prospect of earning high returns.
Sushiswap Founder Faces Exit Scam Accusations
After dominating the DeFi space for about 11 days and locking billions in its liquidity pools, Sushiswap saw a swift demise over the past weekend.
On September 5th, a report from the Block revealed that the anonymous developer and leader of Sushiswap, Chef Nomi, had swapped his SUSHI holdings for 37,400 ETH worth about $13 million.
The move sparked significant criticism from various figures in the crypto space, who were outraged by the founder’s decision to convert tokens meant to develop the project into personal ETH holdings.
The project was always prone to such a devastating sell-off since Sushiswap’s founder held over 50% of the total SUSHI supply.
Vitalik Buterin, CEO of Ethereum, was among the first prominent figures to react to the apparent cash-out by Chef Nomi, subtly suggesting via Twitter that the project was dangerous to investors.
Derivatives trading platform FTX’s founder, Sam Bankman-Fried (SBF), also shared his views on the DeFi project. He tweeted that Chef Nomi had hurt his project and investors and should hand over all the keys and control of Sushiswap to someone else.
Allegations that the SushiSwap creator had exit scammed triggered a sharp decline in the value of the SUSHI token, which plummeted by about 73% in the next 18 hours.
In his defense, Chef Nomi explained in a series of tweets:
“People asked if I exited scam. I did not. I am still here. I will continue to participate in the discussion.”
Control Shifts to SBF
Chef Nomi, who argues that the SUSHI sale was well within his rights as a founder, succumbed to pressure to hand over ownership of his $1.25 billion protocol following the exit scam scandal.
The pseudonymous Sushiswap creator hesitantly offered to transfer full control of Sushiswap to Sam Bankman-Fried on September 6th.
The relatively swift acquisition of Sushiswap by the FTX founder gave new hope to the project, with its native token’s price more than doubling within hours of the takeover. BFT now promises to transform Sushiswap into a more decentralized protocol.