This article is more than six months old

Aragon Association’s $155m treasury redemption plan fails to appease frustrated DAO members

Aragon Association’s $155m treasury redemption plan fails to appease frustrated DAO members
DeFi
Aragon is the DAO builder that did not itself become a DAO. Credit: Rita Fortunato/DL News
What you'll learn
  • DAO builder Aragon is planning to liquidate its treasury.
  • Aragon investors may be able to redeem up to $155 million in Ether, while a newly formed team would retain $11 million to continue the project.
  • But investors are not happy with the split.

Aragon Association, the Swiss non-profit behind the DAO builder project, finally updated all stakeholders on its plans for the project’s $166 million treasury after months of silence on the matter.

However, Aragon DAO members are less than satisfied.

The Association published a fact sheet on Thursday outlining a split of the funds between investors and the team. Investors will share $155 million in Ether while the team will retain $11 million as runway to continue the project.

Aragon investors — those who own the project’s native ANT token ­— will be able to redeem their tokens for Ether within a one-year redemption window. Funds not redeemed during this period will go to the team.

Diogenes Casares, CEO of proprietary trading company Patagon Management, told DL News the plan has a “major issue.”

Patagon is an Aragon investor and a member of the Aragon DAO, a community of investors who have clamoured for control of the project’s treasury.

“A minimum of 35% of ANT [has been] inactive for a year or more, not including the vast holdings of tokens on centralised exchanges,” Casares said. “This means that the Aragon Association could claim well over $50 million.”

The inactive tokens referenced by Casares are the portion of the ANT supply that have not been migrated by their owners. Aragon’s native token contract underwent an upgrade in 2020, and about 35% of those tokens did not migrate to the new contract standard.

Join the community to get our latest stories and updates

Casares and several DAO members contend that these tokens are unlikely to be redeemed for Ether by their owners. This is likely based on the assumption that tokens that have been inactive for such a long time are probably lost.

As such, the team could end up claiming over $50 million after the redemption period, Casares told DL News.

The possibility of the Aragon team realising such a sizeable payoff has not gone down well with the DAO. Several members are against the idea of the team retaining up to 25% of the project’s treasury, especially as the matter was not voted on by the DAO.

‘Regulatory risks’

The Association did address this concern in its fact sheet, pointing out that a DAO vote on the treasury redemption process could have regulatory consequences.

“This decision could not be put to a public vote due to legal constraints, specifically regulatory risks triggered by token speculation and market manipulation,” the Association said, while adding that it took under advisement previous deliberations with the DAO forum when making its decision.

The Association did not immediately respond to requests for further comment.

Casares told DL News that several investors do not accept the current sharing formula while providing an alternate split of the funds.

“I think it would make sense to have a system to split this excess, with the Association getting a guaranteed amount, say $20 million, then splitting the remainder 50/50 between the team and holders,” Casares said.

The Patagon CEO said some investors might consider taking legal action against the Association for breach of contract and damages. ANT holders agreed last year to transfer the treasury to the DAO, a move which never happened.

Casares and Patagon have some experience in DAO-related litigation. The firm secured a temporary restraining order against the Spartacus DAO team in April that prevented the founders from moving assets belonging to the project.

Meanwhile, former Aragon project co-founder Luis Cuende called the treasury redemption the “right move” and hailed the performance of the team.

“Aragon raised $25 million, but through our savvy treasury management and responsible spending, we multiplied that amount,” Luis posted on X, formerly Twitter, on Thursday.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.