Whale Investor ‘Humpy’ Influence Compound DAO’s Governance

Decentralized Autonomous Organizations or DAOs are often hailed as the future of governance in the crypto world, promising a new era of community-driven decision-making.

However, despite their decentralized nature, many DAOs remain vulnerable to the influence of large tokenholders, or “whales,” whose actions—or inactions—can have outsized impacts on these supposedly democratic structures.

This scenario played out recently in Compound Finance when a group known as “Goldenboys” or “Humpy” on X used their token holdings to push through a controversial governance change.

Source: Compound Finance

The Incident: Proposal #289

Earlier this year, a group of investors known as Goldenboys led by Humpy, introduced a series of proposals to the Compound DAO, aiming to reshape the protocol’s governance structure. The most significant of these was Proposal #289, which called for the allocation of 499,000 $COMP tokens—representing a substantial portion of Compound’s treasury—into a yield-bearing protocol controlled by the Golden Boys group.

The proposal came after two previous attempts by the same group to gain approval for similar measures. Despite facing initial resistance, the proposal eventually passed by a narrow margin, highlighting the outsized influence that large tokenholders can wield in DAO governance.

The vote saw a last-minute surge of support, tipping the scales in favor of the proposal, which many in the community had initially opposed.

Source: DeBank

Allegations of Manipulation

Michael Lewellen, an OpenZeppelin security solutions architect, has raised concerns that the proposal’s passage was influenced by a sudden influx of $COMP tokens from five addresses. These addresses reportedly withdrew over 230,000 $COMP from the Bybit exchange just before the vote, raising questions about the integrity of the voting process.

Lewellen referred to the situation as a potential “governance attack,” suggesting that the group used their voting power to bypass the usual safeguards.

Humpy has also faced similar allegations in the past. In 2022, he was involved in directing governance on the Balancer protocol, where he reportedly used a large quantity of $BAL tokens to influence outcomes in his favor and this history has fueled suspicions that the recent events on Compound could represent a deliberate strategy rather than a legitimate governance decision.

In response to the allegations, Humpy denied any wrongdoing and stated “steal funds” is a “wrongful & misleading phrase.” He added that the funds would be managed within a trust structure that includes safeguards against unauthorized use. He emphasized that the proposal was a legitimate outcome of the governance process and expressed appreciation to those who supported it.

Repercussions and Broader Concerns

The situation at Compound was exacerbated by the inactivity of other large tokenholders, such as venture capital firm a16z, which abstained from voting, allowing Humpy to dominate the decision-making process.

Ultimately, this incident led to private negotiations and a compromise that replaced the original proposal with a “Staked Compound Product” proposal, redistributing 30% of Compound’s revenue to staked $COMP holders and ultimately preventing the Goldenboys group from gaining excessive control over the protocol.

The incident has raised concerns about the susceptibility of DAOs to manipulation by large tokenholders, prompting calls for stronger safeguards and more active participation from the broader community.

The overarching goal remains to develop governance systems that are resilient, responsive, and capable of evolving to meet new challenges.