Bybit has requested that the Paraswap DAO return the fees it earned from transactions linked to a hack.
A division emerged within ParaSwap DAO, with some members supporting the idea of returning the fees under conditions, while others voted to deny the refund.
Bybit admitted that it initiated a proposal urging the DeFi platform ParaSwap to return fees collected from transactions that the Lazarus Group made with stolen assets.
On March 4, a proposal on the ParaSwap DAO forum requested that the DAO freeze 44.67 Wrapped Ether (wETH), nearly $100,000 in value, and transfer it to a specific wallet address.
Skeptical DAO members questioned the proposal in its early stages and requested confirmation before proceeding.
Bybit confirmed through a post on its official X account on March 5 that it had initiated the proposal for the funds’ return.
DAO members engaged in a debate over whether to refund the fees, considering the potential implications for future situations.
Ignas, a DeFi researcher and ParaSwap DAO delegate, highlighted a key challenge for the DAO by sharing his thoughts in a post on X.
Ignas argued that the DAO profiting from the hack created “bad optics” and added that returning the funds would demonstrate support for another player in the sector.
He warned that refusing to return the funds could expose the DAO to regulatory scrutiny and legal challenges.
He also cautioned that approving the refund might set a problematic precedent in DeFi.
“Code is law. The DAO earned the fees legitimately via smart contracts. And if funds are returned now, what about future cases? Sets a dangerous precedent.”
The ParaSwap delegate pointed out that this decision could also impact ThorSwap, which the hackers used to exchange the stolen funds for other crypto assets.
As of February 27, THORChain had processed over $1 billion in swap volume, driven by the Bybit hackers converting digital assets through the protocol.
By March 4, THORChain’s transaction fees had reached $5 million, with total trading volume hitting $5.4 billion.
See the amount of the stolen funds that are now untraceable, according to Bybit CEO
Bybit’s hackers processed fee conversions via the protocol. If the exchange made a similar refund request to THORChain, it could reclaim a much larger sum.
A journalist sent Bybit a request for comment, but the exchange did not respond immediately.
A community member named SEED Gov proposed three approaches to address the situation: reimburse the full amount, decline the refund request, or structure a return where the DAO retains 10% as a bounty under Bybit’s bug bounty guidelines.
In the ParaSwap DAO, community members are debating these options, with differing opinions emerging. Some members support refunding the full amount, while others prefer a structured repayment plan that includes keeping the 10% bounty, ensuring the DAO has no further liabilities.
Some members oppose the idea of returning the funds to Bybit altogether.
One community member argued that ParaSwap would damage its reputation by agreeing to the refund.
Another member recalled a similar event from 2013, when a protocol asked ParaSwap to reimburse fees after hackers conducted swaps through its platform.
Citing the previous decision against refunding fees, the DAO member insisted, “There is no reason to rule otherwise this time.”
