SBF Speaks Out On SushiSwap Saga

DeFi investments have generated 3,000%+ year-to-date returns for some, while others experienced 80%+ losses this week amid rumors of scams. One such project was the $SUSHI protocol, which promised incredible upside to participants.

If you’ve visited crypto-twitter in the last 48 hours, you might have gotten dragged down the SushiSwap rabbit whole. And in case you took the weekend off, here’s a quick rundown of perhaps ‘the most dramatic’ protocol ever.

SUSHI’s Creation

SushiSwap, created by animated and anonymous character Chef Nomi, is a fork of VC-backed UniSwap, a decentralized exchange. Think of UniSwap as a vending machine for tokens, without a middle-man in place. A DeFi favorite, UniSwap’s daily trading volume has surpassed that of Coinbase.

SushiSwap promised to take all of the best features of UniSwap and improve on its governance by creating a community owned fork using a voting token called SUSHI. Anyone who joined the community could become a liquidity provider by staking SUSHI and ETH on UniSwap, which would eventually be transferred to SushiSwap when it is launched. The combination of your liquidity stake, or voting power, is your *SUSHIPOWAH*. No, I’m not kidding.

The SUSHI token was a rising star, representing up to 77% of daily trading volume on UniSwap as of September 1st. SUSHI’s peak market cap was $278M.

SUSHI’s Demise

On September 5th, rumors started swirling that Chef Nomi, SushiSwap’s lead developer cashed out $15M worth of developer funds of personal gain, causing the token to crash 88%. The withdrawal amount to 20,039 ETH and 2,558,644 SUSHI from the dev fund.

Following outcries from the community, Chef Nomi opened up on twitter, hoping to convince his community that he did not “exit scam”:

But prominent DeFi developers were not convinced. Vitalik Buterin, creator of Ethereum, took to Twitter to ring an alarm for DeFi investors:

While Sam Bankman-Fried, Founder of FTX, a popular cryptocurrency derivatives exchange, also offered his thoughts, starting with “Chef Nomi sucks”:

SUSHI’s Revival

The back and forth twitter jabs went on later into the night, until we woke up on September 6th, with Sam Bankman-Fried (”SBF”) encouraging Chef Nomi to give up control of the project.

Chef Nomi reluctantly offered to transfer all keys to the project to Sam Bankman-Fried and his team.

This unexpected takeover created new hopes for SushiSwap as a project and SUSHI token holders. The overall community reaction was positive, with the price rising from $1.12 to $3.38 within a matter of hours. SBF assured that keys of SUSHI would be transferred to a multi-sig, which would then become decentralized. 

The rising price action, left one bitter chef:

What are SBF’s plans for SUSHI?

I called up Sam Bankman-Fried to ask him a few questions about the saga.

Did you expect to take control of SushiSwap?

SBF: “No, I was pretty shocked. I first realized that it was a possibility when someone shouted that he [Chef Nomi] tweeted! I was a little bit shocked, a little bit humbled and honored. It was probably, honestly the thing that was able to best help get SUSHI through this and a pretty reasonable idea, all thing considering.” 

Have you picked the MultiSig holders at this time?

SBF: “Not yet. It’s going to be a vote. The first step of the process is nominating people for it on Twitter and then a vote by ShushiSwap holders.”

What are your plans for SushiSwap now that you have the keys?

SBF: “Make sure the transition happens and happens effectively. And then the multi-sig transition happens. And after that, I no longer have the keys. Formerly my duty here is just those two things. And communication about those. Once migration has happened, I have a lot of ideas of what I’d like SushiSwap to do…composing it with margin trading, borrowing and lending, and building out a version on Serum. But that would not be something I would unilaterally do. It would be up to the community to decide what happens.”

Serum is a new protocol built on Solana, which promises a higher through-put rate and less gas fees than Ethereum.

What lessons do you think the SUSHI saga holds for future DeFi projects and their investors?

SBF: “There has been a lot discussion on how founders and developers should work, and whatever structure there is, think if it’s really going to work. Anonymous founding teams that have a lot of power, is a pretty scary quadrant to be in. To the extend that trust is necessary, you want them to be people that you trust and that have a track record. And if you are going with new or anonymous founders, you want to make sure that protocol is designed so they don’t have the ability renege.

If you want to anonymously launch community, go ahead, just make sure you are on the same page as your community about that powers that you do or don’t have.”

What is the future of DeFi?

SBF: “We’ll see. Certainly you can imagine a scenario where it could flame out back into hibernation for a while, and that could happen with a few more disasters and not much innovation. On the flip side, you can imagine a huge amount of the world infrastructure ending up on chain from crypto trades to non-crypto trades, to file-transfer protocols, to messaging and social media platforms. How do we get there? The answer is we need to build out really powerful systems that scale to that. In the end come down to execution. And hopefully we can grab the opportunity and get there.”

As for Chef Nomi, several holders have threatened legal repercussions through a class action law suit. As the Chef remains anonymous, at this time it is unclear if any repercussions can be made, and if the FBI and IRS will get involved. Stay tuned.

Sincere thank you to superstar developer and friend Bobby Battista in the research of this article!