DeFi lending protocol Compound Finance has once again found itself embroiled in DAO drama. A Compound community member, username “ugurmersin,” has accused the Compound Foundation of the “misappropriation” of 8.42 million DAI.
According to a post on the project’s governance forum, the sum was used to buy 344,780 COMP tokens which were delegated to the Foundation’s voting address.
They were then used to vote on two proposals, one of which included the transfer of $14 million to the foundation for a year’s development of the v4 protocol.
The foundation has responded to the allegations, defending its actions as consistent with the conditions under which the funds were granted.
Both proposals mentioned in the accusation had enough votes to pass without the foundation’s additional COMP.
Compound Foundation raiding the DAO treasury?
— Mikko Ohtamaa (@moo9000) September 28, 2026https://t.co/z85nqvfU1g pic.twitter.com/CdnhiOlkV1
Read more: THORChain refuses to block Bitget funds, despite pausing after own hack
“Misappropriation” of DAO funds?
The funds in question were left over from the reserve of Compound’s now-deprecated v2.
Proposal 536, passed in February, handed the DAI over to the foundation to be used “in a manner prudent for addressing important protocol needs.”
It “does not establish an explicit treasury management program,” though it does state that the foundation is “allowed to maintain sufficient COMP availability for protocol components that depend on it, such as reward distribution and other forms of governance execution.”
Ugurmersin’s post takes issue with using the funds to vote on proposals 580 and 582 which “moved nearly the entirety of DAO funds” to a Treasury Management Committee (which he believes “has a separate control issue”), and approved the $52 million v4 package which “benefits themselves.”
The foundation responded to the allegations in its own forum post, stating that Proposal 536 “expressly did not prescribe” how the money was to be spent and “excluded only ‘discretionary trading/speculative activity,’ non-essential operations, and Foundation overhead, personnel or vendor costs.”
The post also confirms that the DAI reserves were converted to COMP, which was used “to support protocol operations and governance continuity.”
It denies any trading or foundation spending, and stresses that “the assets remain DAO-owned.”
The use of COMP for voting on proposals 580 and 582 is not addressed.
In turn, ugurmersin responded to Compound’s statement, refuting its claim not to have traded the funds. “You sent 100K COMP straigth (sic.) back to Binance after passing the votes. LMAO,” he wrote.
Protos has been unable to verify this claim.
Read more: Compound DAO faces calls for more oversight amid conflict of interest claims
Compound’s DAO dramas
The controversy comes as Compound, one of the decentralized finance sector’s oldest protocols, celebrates its eighth anniversary. Over that time, the lending protocol has seen plenty of DAO drama play out on its forums.
Last year, conflict of interest claims swirled over a proposal by Gauntlet to deploy funds to its client (and Compound competitor) Morpho. Gauntlet’s contract renewal later faced pushback.
Read more: Gauntlet’s $2.3M contract renewal with Compound faces backlash
A 2024 proposal, branded a governance attack, exposed the dangers of DAO apathy at Compound after it narrowly passed on its third attempt.
Technical hiccups have also hit Compound, firstly via the two–stage “reverse rug” in 2021, which saw a total of $147 million worth of excess rewards distributed.
Less than a year later, a faulty upgrade saw the $830 million cETH market frozen while a fix passed DAO governance.
In addition, the Compound Finance front end has been hijacked twice, once in 2024 and again in March this year. Its X — then Twitter — account was compromised and used to spread a phishing link in 2023.
Got a tip? Send us an email securely via Protos Leaks. For more informed news and investigations, follow us on X, Bluesky, and Google News, or subscribe to our YouTube channel.
The post Compound Foundation accused of ‘misappropriating’ DAO funds appeared first on Protos.
