After Shaping Sushi’s Reform Plan Arca Hits the Exits
Arca, a crypto-focused asset manager, appears to have sold its $3.1M position in SushiSwap’s token. And many of the crypto exchange’s community members couldn’t be happier.
On Aug. 30, a transaction from a wallet associated with Arca was flagged in the SushiSwap community Discord for withdrawing more than 3.1M SUSHI from staking and transferring the tokens to FTX, a centralized cryptocurrency exchange.
A sudden influx of volume was spotted on FTX shortly after, with the price of SUSHI abruptly sliding from $1.10 to $1.07 over the course of a single three-minute candle. The asset has since traded between $1.02 and $1.07 in the past 24 hours
Whale With Influence
On July 17, 2021, Arca’s chief investment officer, Jeff Dorman, tweeted that the firm was “one of the largest xSUSHI holders” and controlled 7.5% of its circulating supply.
As a whale that’s exerted influence on SushiSwap’s direction, Arca has long been the target of members’ ire.
“Sushi is not community-run DAO anymore… Now it’s controlled by Arca+Cumberland plus a few others who make all the shots with the comp committee,” tweeted Pegbit, a core Sushi team member, in July.
Another community member, Mountain_goat, welcomed the apparent trade yesterday. “Thank you Arca for absolutely nothing,” Mountain_goat said on Discord. “You came, you saw, you made a mess… Best news in a long time. Here’s to being a community again.”
Other community members were equally relieved at Arca’s apparent exit from its SUSHI position.
“If they already sold that’s great news,” ChronoFury said on Discord, adding that the wallet has long been suspected of belonging to Arca, “I’m guessing that high volume red candle on FTX was them.”
Arca did not respond to a request for comment from The Defiant.
The crucible unfolding at SushiSwap has pulled back the curtain on how DAO-led projects are laboring to balance a vote-reliant management model with a growing business.
SushiSwap is the fifth-largest DEX with a total value locked of $945M, according to DeFi Llama. Its SUSHI token has a market cap of $206M, but its price has tanked 89% since the start of the year, compared to a 63.6% drawdown from its top competitor, Uniswap, over the same period, according to CoinGecko.
RSK, a member of Samurai, SushiSwap’s community engagement team, asserted that the wallet does belong to Arca, and that all of the tokens it used to contain have been moved, not just SUSHI. “Not sure what happened but they have emptied that wallet which also had other tokens,” RSK said in the governance forum. “They brought SUSHI around 10$ avg, got burned badly on LUNA crash too.”
Arca’s departure punctuates a tumultuous period for Sushi’s governance and numerous leadership crises. In recent weeks, the community has been debating on how to structure and fund a compensation package for an incoming “head chef” who could stabilize the venture and reset its strategic growth plan.
In early 2021, SushiSwap was firmly established as a top decentralized exchange and DeFi protocol under the guidance of co-founder 0xMaki, with the platform positioning itself as a decentralized alternative to the VC-backed Uniswap.
However, 0xMaki stepped down in September 2021, and escalating infighting resulted in the project’s CTO, Joseph Delong, resigning in December as tensions mounted between himself, Arca, and the broader Sushi community according to report by Blockworks.
Arca then proposed that Sushi merge with Frog Nation, the DeFi network of Wonderland’s Daniele Sesta, in December, but the deal fell apart after it was revealed that Frog Nation’s CFO, Sifu, was a co-founder of the collapsed Canadian crypto exchange, QuadrigaCX.
On Discord, CryptoLamer, a SushiSwap Samurai, said that Arca claimed to have done rigorous due diligence into Frog Nation just a couple of weeks before Sifu’s involvement with QuadrigaCX became public knowledge.
SushiSwap sought to regroup, with the community backing the Sushi 2.0 proposal to establish a new roadmap and formalize titles and compensation for SushiSwap contributors. Sources familiar with the proposal told The Defiant that Arca insisted on installing a new head chef as part of the proposal.
The search for a head chef further inflamed internal divisions within the project, with many in the community accusing SushiSwap’s new two-person compensation committee of offering an exorbitant pay package including a third of SUSHI tokens earmarked for staff salary to a candidate they appeared to have hand-picked with input from Arca in Jonathan Howard.
On the governance forum, Mountain_goat commented that Howard’s nomination lacked transparency. “It’s disappointing that we are still operating similarly to during the frog takeover,” they said. “Arca have unfair influence akin to minority shareholder oppression.”
Rekt by LUNA
Alilot, a community member, posted “Another Arca special… not rekt by LUNA enough, have to capture Sushi as well.”
As a result of the widespread community pushback, Howard’s nomination for the position of head chef has not been elevated to a formal token-based snapshot vote despite the preliminary governance poll passing by a narrow margin of 53% on August 11.
Instead, a recent governance poll queried the community on their preferred compensation package for the vacant position. The community is also currently in the process of fielding possible head chef candidates.
A recent proposal to overhaul SushiSwap’s structure and launch a new DAO funded by protocol fees and introduce vote escrow (VE) tokenomics has also received widespread support, with a preliminary governance poll closing with 88% of votes in favor in early August.