The DeFi Education Fund responds to UNI sell-off: Fund operations have autonomous decision-making power and will announce the annual budget within 90 days

On July 13, the DeFi Education Fund (DEF) sold 500,000 UNI tokens for a profit of over $10 million, prompting the organization to respond to questions in a blog post today.

Chain Catcher previously reported that from May to June, a group of student organizations from universities such as Harvard initiated a proposal on Snapshot regarding DeFi policy lobbying and education, titled "Should 1 million UNI be allocated from the community treasury to protect the protocol and DeFi from legal and regulatory threats and help ensure the promise of DeFi?" At the end of June, the proposal was officially passed on the Uniswap governance page, leading to the establishment of DEF. Subsequently, the organization received a grant of 1 million UNI from the Uniswap treasury.

According to Chain Catcher’s investigation, the student organizations were supported by a16z. There were also many signs of controversy during the voting and token sale phases.

In its response, DEF stated that selling half of the tokens was necessary to convert to USD to initiate the organization’s operations. Given the unpredictable and rapidly changing regulatory environment, as clearly stated in the previous proposal, DEF has significant discretion in its operations. Additionally, the organization announced that it would publish its annual budget within 90 days and promised to maintain transparency when deploying funds in the future according to the proposal.

In response to previous external concerns about the organization’s lack of transparency, potential insider trading, and conflicts of interest among managers, DEF provided separate responses.

Regarding the purpose and method of the transaction, DEF stated that most of its expenses would be denominated in USD, and "regulatory risk is the greatest threat to DeFi services and freedom." To guard against any market downturns, it was necessary to convert half of the funds into USD to provide a sustainable budget so that DEF could "quickly get to work."

Regarding the use of Genesis as a market maker for this transaction instead of diversifying the balance sheet through Uniswap, DEF responded that currently Uniswap "does not have enough liquidity to support a sale of this scale." However, as the liquidity of the Uniswap protocol grows, DEF expressed hope to utilize the Uniswap protocol for any diversification in the future.

DEF stated that all transactions are subject to public audit. The organization also described the specific transaction process: on July 10, the organization requested Genesis to sell 500,000 UNI. Around 3 PM Eastern Time on July 12, Genesis completed the sale of UNI at an average price of $20.4. On Monday evening, DEF sent 500,000 UNI to Genesis from its multisig, and Genesis sent approximately $10.2 million in USDC to DEF.

Furthermore, DEF stated that the sales amount of this transaction only accounted for 5% of UNI's daily trading volume, making it unlikely to negatively impact the market price of UNI.

Regarding the use and management of funds, DEF stated that it would publish its annual budget within the next 90 days. Additionally, DEF mentioned that the proposal authors are not on the committee and will not participate in the committee's fund operations.

DEF also plans to introduce the Tally Failsafe tool to deploy funds in a pre-loaded manner and invest general funds into this insurance over the next four to five years. It is reported that in Uniswap governance, using the Tally Failsafe tool can prevent transactions and withdraw funds. Currently, Failsafe is still under review, and DEF stated that once Failsafe is safely available, the organization will use it.

Moreover, DEF indicated that most members of the DEF committee have not been compensated for their related work. DEF stated that among the seven members of its advisory board, four hold senior legal positions at top DeFi software development companies and have independently utilized their time for DeFi education work over the years.

The fairness of the voting process for DEF's previous proposal has also been questioned. Before DEF sold UNI tokens, one of the committee members and a multisig holder, Larry Sukernik, sold approximately $50,000 worth of UNI five hours prior, raising public concerns about potential insider trading.

DEF stated that the member sold $50,000 worth of UNI on behalf of a gifted group, and although the $50,000 transaction occurred "around the same time as DEF's sale of UNI," it still happened after DEF's sale of UNI.

DEF stated that the committee member would be prohibited from participating in UNI transactions for the next seven days to avoid any conflicts of interest and questions.

Of the 1 million UNI grant received by DEF, another half remains pending. DEF previously stated that it would sell another 500,000 UNI within 24 hours after the completion of the first sale on July 13. However, Etherscan data shows that as of the time of publication, the remaining 500,000 UNI is still in DEF's wallet address, indicating that the organization has temporarily shelved its plan for the second sale.