I’m concerned that the current plan to “seed” the recovery pool misrepresents the actual situation. The ~$3.8m of assets being used as initial capital are not new contributions from Drift or Tether – they’re what’s left of user deposits that survived the hack. Instead of returning those non‑stolen assets to the depositors they came from, they’re being liquidated and swept into a pool that Tether and Drift present as their rescue plan.
This sits awkwardly with Tether’s public stance that its mission is to safeguard other people’s money and avoid arbitrary interference with users’ funds. Here, a small group of depositors effectively takes a 100% loss on assets that were never stolen, while Tether benefits from those liquidations as part of a structure it helps design. This is an unequal redistribution from specific users to the protocol and its partners, not a “seed contribution” by Tether/Drift. In this instance Drift is not acting for “the benefit of all users” as required. Governance should consider alternatives that first return these residual assets to restore those depositors.
For these reasons, I believe tokenholders should vote NO on any proposal that treats surviving depositor assets as free seed capital, unless and until a fairer treatment of those users is incorporated.
isn’t giving back the 3.8m the same as redeeming the recovery token? Also I dunno how it would cleanly work to return in the assets as is. Drift’s latest post goes into it a bit, but TLDR, it would break the accounting and that won’t work on relaunch.
If for example you currently hold 1 LBTC on deposit worth approx. $80k which was not stolen and only fraudulent moved, the current proposal would “seize” this coin and sell it for “seed” capital. The fair thing is to obviously unwind the fraudulent transaction and return the deposit to the user. Key point - this user’s deposit assets were never stolen but are now being "seized’.
I get the concern, but I don’t think direct in-kind return works cleanly in a pooled borrow/lend system.
A displayed spot balance is not a specific coin in a segregated box. If users have 100 BTC of claims but only 2 BTC remains, who gets that 2 BTC? First movers? BTC depositors pro rata? What about borrowers, cross-margin accounts, and liabilities tied to the same market?
This is why I think the recovery-token approach is probably more fair than trying to return remaining assets in-kind. It is not perfect, and current funding is still far too low, but at least it gives affected users a consistent claim instead of arbitrary winners and losers.
Separately, affected users should be paying attention to this Insurance fund split:
https://driftgov.discourse.group/t/bifurcating-the-insurance-fund-return-staker-capital-consider-protocol-owned-accumulation-for-recovery/332/1
User-owned Insurance fund should be returned. But protocol-owned IF is different, and we should mobilize to get that portion verified on-chain and considered for recovery. That could add real capital to the recovery pool without breaking trust with user IF stakers.
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I understand that in a pooled borrow/lend system you can’t just “rewind” the protocol and match every coin to every trade. My concern is narrower: the way the $3.8m of surviving assets are being treated.
As things stand, the cost of this $3.8m “seed” is borne very unevenly across addresses. Some wallets lost almost everything; others still have a clear, positive entitlement to coins that were never actually stolen. If Drift/Tether are not prepared to make a genuine initial contribution to the Recovery Fund, then it would be more honest for the pool to start at zero than to present these user residues as if they were protocol/partner capital.
A proper reconciliation per address of coins stolen vs coins remaining is already being done to compute “verified loss”; the same data show that a subset of addresses has significant entitlements to assets that are still on the platform. Sweeping up the entire $3.8m and treating it as if it were stolen is not reasonable. Behind each address are real depositors, and governance should at least consider whether part of these surviving assets should go first to those depositors pro‑rata, before the remainder is socialised into the Recovery Fund.
that’s true. This is going to get really messy. e.g if you hold MOTHER token, technically they never drained it. However, if the team stands by the borrow/lending pool as a whole is affected, then the losses will be socialized. It seems to be the case based on how the protocol works.