Bybit has confirmed that it requested the DeFi platform ParaSwap to return fees earned from swaps made by the Lazarus Group. The notorious North Korean hacking collective allegedly used stolen funds from Bybit in these transactions.
On March 4, a proposal was submitted on ParaSwap’s decentralized autonomous organization (DAO) forum, asking for the return of 44.67 Wrapped Ether (wETH), worth approximately $100,000. The funds would be sent to a specified wallet address.
Initial Doubts and Bybit’s Confirmation
The request was met with skepticism from DAO members, many of whom demanded verification before moving forward. A day later, Bybit posted on its official X(Twitter) account, confirming that it was behind the proposal.
This sparked a debate within the DAO community. While some members supported returning the funds, others raised concerns about the long-term consequences of such an action.
Ethical and Legal Dilemma
DeFi researcher and ParaSwap DAO delegate Ignas took to X to highlight the difficult decision facing the DAO.
He acknowledged that returning the funds would prevent the DAO from profiting off a hack, showing solidarity with Bybit against a sanctioned state actor. He also noted that keeping the funds could invite regulatory scrutiny.
However, Ignas also pointed out that ParaSwap earned the fees through legitimate smart contract transactions. If the DAO decided to return these funds, it could set a precedent for future cases, potentially forcing DAOs to intervene in centralized exchange security failures.
“I’m leaning towards returning most of the funds, minus a 10% bounty,” he said, expressing concerns about the precedent this decision could establish.
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Possible Outcomes
DAO member SEED Gov outlined three possible responses: returning the full amount, rejecting Bybit’s request, or negotiating a structured return while keeping 10% as a bounty. The last option aligns with Bybit’s existing bug bounty program.
The debate within the ParaSwap DAO forum continued with no clear consensus. Some members saw the move as a goodwill gesture to maintain industry integrity, while others feared it could blur the lines between centralized and decentralized responsibilities.
Bybit CEO Ben Zhou previously revealed that nearly 20% of the stolen funds are now untraceable. This comes less than two weeks after the exchange lost over $1.4 billion in a sophisticated attack linked to North Korean hackers.
The outcome of ParaSwap’s decision could have significant implications for DeFi governance. Whether DAOs should return funds obtained through smart contract transactions remains a key question for the industry.
Also Read: Bybit Hackers Complete Laundering $1.39B ETH Via Thorchain, Thorchain Profits $5.5M