Dialogue with the Father of DeFi AC: "In the end, I am very likely to go to prison."

Original Title: 《Andre Cronje: The rise and fall of a DeFi god》

Author: Paige Aarhus, DL News

Translation: wesely, The Way of DeFi

In a home within a gated community in Dubai, Andre Cronje (AC) was interviewed, and he stated bluntly:

"Ultimately, I am very likely to go to jail."

"Can you elaborate on that?"

"Unfortunately, no."

"Are you being sarcastic?"

"No, this is not sarcasm."

This year has been a crazy one in the crypto space, and the fate AC spoke of has already befallen another developer—Tornado Cash developer Alexey Pertsev, who has been in a Dutch prison for four months awaiting charges.

At 39, AC is a well-known figure in the DeFi space and one of the earliest builders in the field. During the summer of DeFi in 2020, AC launched the first yield aggregator, Yearn Finance, playing a key role in the rise of liquidity mining. According to CoinGecko, its native token YFI skyrocketed from $32 in July 2020 to $43,000 two months later.

The projects AC launched subsequently made many people wealthy, bringing him immense fame, but this also became his fatal flaw. After millions of user funds were stolen and his followers turned against him, within two years, the once DeFi father became known as a rug-puller.

"That's the problem with being a God; you're no longer allowed to change or make any mistakes," he said.

In a rented spacious villa, he curled up on a dark gray sofa; the home was so large it even had a standalone elevator. A few days later, due to construction noise, he moved to a hotel. It was clear he had come to see this city as his home, but unfortunately, he refused to take photos for it.

Conversations with AC and those around him revealed a past story. Years ago, in Stellenbosch, South Africa, he was a young computer genius who adopted many stray animals but was often bullied at school. He dreamed of becoming a defense attorney, hoping to advocate for cases.

The moral code AC displayed during the conversation was often confusing, as it was frequently contradictory. He expressed regret for those who lost money in his projects but implied they could only blame themselves. AC stated he had never bullied anyone:

"Not once, never," he said.

He was sometimes sad, sometimes contemplative, sometimes defensive, and sometimes humorous, and he never used the elevator in his home. "I don't like taking risks," he said expressionlessly.

But during the several hours of the interview, it was hard to tell if he believed the words he was saying. It reminded one of a line from the 1970s TV show "MAS*H," where Colonel Flagg sarcastically remarked about the CIA: "No one can get the truth out of me because I don't even know what the truth is; I keep myself in a state of extreme confusion."

Now, AC seems poised for a comeback; he has rejoined the Fantom Foundation, which operates the public chain platform Fantom. AC's goal is to establish a traditional bank, not for crypto. But his remaining followers hope he can help them through the crypto winter; how will he bear this burden?

The Change Brought by Yearn

Let's turn back time to early 2020 when DeFi was just emerging, and AC gained the support of many developers with iearn.finance (now known as Yearn).

Yearn achieved yield optimization for DeFi farming through automation, creating a huge stir. In the past, users could earn substantial yields by investing their cryptocurrencies in various DeFi protocols for lending or trading. While this was acceptable in a good market environment, chasing returns in this way, known as liquidity mining, could also be quite laborious.

Nansen's research found that most users participating in liquidity mining would abandon the protocol after two to three days, making timing crucial. Top liquidity mining farmers knew when to jump in and when to exit, moving on to the next protocol. Yearn automated this task by pooling users' crypto assets in smart contracts (called vaults) and rotating the assets in and out of different protocols, including dYdX, Aave, Compound, and others.

After launching Yearn's token YFI in July 2020, Yearn truly took off. AC earned praise for the fair distribution of YFI; when the token launched, anyone could deposit liquidity into the Curve yPool or YFI Balancer pool to earn token rewards.

Unlike typical project token distributions, AC did not allocate any YFI tokens to his team or informed investors. According to Michael Chen, an advisor and former CMO of the Fantom Foundation, only two people knew about YFI before its launch: Chen and Lvan from LobsterDAO. So even if AC ultimately aimed for profit, at least he did not show it during YFI's debut.

Such actions won the support of many developers and investors, and this approach aligned with the spirit of DeFi, so Yearn was considered a truly decentralized application by many at the time. However, as others pointed out, AC had the ability to become a behind-the-scenes manipulator by controlling the smart contracts.

In the wealth legends of cryptocurrency, Yearn turned paper traders into millionaires overnight. The exact reality is hard to know, but many wealth tutorials about Yearn emerged on YouTube, further solidifying AC's star status.

On July 16, 2020, the day before YFI was publicly released, $8.1 million worth of cryptocurrency was locked in Yearn's smart contracts. By August, the TVL had surged to $1.5 billion, peaking at nearly $7 billion in December 2021.

Token Brice from DL News's affiliate said, "I still haven't found an aggregator that can achieve even one percent of Yearn's performance."

Finding and critiquing weaknesses in code is a common practice in the DeFi industry, and AC is an expert in this area, which is also how he entered the industry (AC published many code assessments of crypto projects on media platforms early on, accumulating a significant following). His former colleagues referred to him as a genius developer who could solve problems plaguing the entire team in a matter of hours and explain everything in a concise manner.

"Many developers can't do what AC does, both system design and clear written expression," AC's friend Matt Visser said. "He can walk freely on both planes."

Yearn was not AC's first attempt in the crypto space. In August 2018, at a conference held at the Shilla Hotel in Seoul, AC joined the Fantom Foundation as a technical advisor and core developer. As a new public chain and open-source smart contract platform, Fantom was touted as a competitor to Ethereum.

AC said he noticed issues with Fantom from the start, including a lack of development talent and an inability to achieve lightning-fast transaction speeds.

By 2019, multiple pressures, including operational overspending, high listing costs, and the crypto winter, left the foundation with little of the $40 million raised during its 2018 ICO, but Cronje insisted on the project's development.

"I'm actually not 100% sure why I continued to help at that time," he said.

In March 2019, during the Oh Hey Matty podcast, when AC was asked why so few developers listed on the Fantom website could code, Cronje told the host that those developers had actually left and said the project's status was good. A few months later, he began researching Yearn.

YFI made AC famous; his Twitter followers surged from fewer than 5,000 in July 2020 to over 110,000 by February 2021. Then came the deification of AC; in July last year, Yearn published a quirky tome titled "The Blue Pill," a 104-page e-book that opened with a god-like version of a benevolent savior, with AC himself as the protagonist: "Yearn was not designed by anyone; it came from AC's gift to all YFI," the text stated.

The book became stranger from there, but it also captured the culture of DeFi: the fusion of social, political, and financial interests and a community of evangelists who are always inclined to be drawn to messianic figures.

Visser said AC became one of them, "He played the savior for many."

"The Blue Pill" portrayed AC as a wise philosopher, while fans depicted him as a god and the all-powerful Marvel villain Thanos. In response, AC said he was unprepared and that it was "very painful."

"I'm no longer allowed to have flaws; one thing I've always liked is that I would speak my mind no matter what," but this habit has suddenly turned into a burden.

The Initial Start

AC grew up in a nuclear family with his parents, sister, and pets. He described his upbringing as "monotonous and white-picket-fence."

At the time, his father was a natural science teacher, his mother was a librarian, and his sister Tanja is five years older than him. According to Tanja, Andre Cronje was a "lovable little brother" who loved animals and outdoor activities, but due to threats from AC's critics towards his family, Tanja requested that her current last name not be used in the interview.

According to Tanja, Andre Cronje was creative and intelligent; he could achieve good grades without much effort. As he grew older, he became more isolated, playing video games only with a close-knit group of friends.

AC gave a more straightforward assessment of himself: "I went to a proper athlete school as a very pale, overweight nerdy kid, and I was often bullied there."

During his teenage years, he began using a programming language called Pascal to write small video games, such as Hangman. In his first computer science class in ninth grade, he encountered a recurring problem: very few people could keep up with him, leading to conflicts even with teachers at the time.

AC said he once dreamed of becoming a courtroom lawyer to advocate for cases. He studied law at Stellenbosch University but quickly lost interest. "The only thing that kept me going was when we did mock trials, but that work was less than 2% of what we actually did."

He still dreamed of being a valuable debater who wouldn't crumble under pressure. However, the courtroom is a controlled environment, while DeFi and the internet it inhabits are places of free competition. Additionally, the ugly side of online fame made it hard for him to accept.

Before YFI was launched, AC had been struggling with a growing fanbase and the accompanying critics, leading him to state before YFI's launch that he wanted to completely exit the industry, "The community is full of hostility," AC wrote in a Medium post that February.

This time he didn't truly exit, but his projects began to come under attack.

The Beginning of the End

In September 2020, AC announced a new project called Eminence on Twitter, describing it as a comprehensive platform for online game developers, contributors, and players. Although Eminence was still in development and the contracts had not been tested, eager users wanted to seize a potential opportunity similar to YFI and began flooding into Eminence.

Hours after AC's tweet, an attacker stole $15 million in assets. AC said he was asleep at the time. He attributed the issue to his preference for testing in production, akin to plugging holes in a ship while at sea; experienced developers could exploit this for profit. In the incident, the hacker inflated the price of Eminence's native token through a "flash loan," then quickly sold before the price plummeted. The attacker subsequently sent $8 million to AC's controlled wallet, making it appear as if AC had embezzled the funds. AC stated he did not steal users' money, but he was nonetheless left with a tarnished reputation.

The characteristic of DeFi is also its flaw: no one can control it, and no one can be blamed; users bear the risk themselves. If you don't like it, just deposit your money in a bank, and that is DeFi. He said, "Product testing is just a declaration; if you don't carefully check your blind spots, you could lose all your assets."

"We hadn't even made those contracts public at that time," AC said. "I didn't tell anyone to use these things; you know, if someone loses money because of it, fuck you."

AC said the Eminence hack exposed a new "duality": "People lost money because of me, but that's not something I can reconcile."

Later, C.R.E.A.M. Finance emerged, named in homage to a Wu-Tang Clan song. Cream is a lending protocol where users borrow against their cryptocurrency collateral. In 2020, while working at crave, AC announced in a Medium article that crave would "partner" with Cream to update the protocol. He told DL News that after Cream was plagued by hacks and vulnerabilities, he became an advisor to the company, but in February 2021, C.R.E.A.M. Finance was hacked for $38 million, in August 2021 it was hacked for $19 million, and in October 2021 it was hacked again for $130 million.

C.R.E.A.M. Finance TVL (January 2021 - November 2021)

In 2022, things got worse as AC teamed up with a pseudonymous Daniele Sestagalli, known as Dani, to launch a project called Solidly. However, partner Sestagalli revealed in January that he was also collaborating with Omar Dhanani (known online as Sifu).

Dhanani admitted in 2005 to conspiring in the U.S. to commit crimes related to credit card, debit card, and identification document fraud, and he changed his name to Michael Patryn to evade attention. Dhanani later collaborated with Gerald Cotten, co-founder of the Canadian cryptocurrency exchange Quadriga, who unexpectedly died in 2019, leading to the disappearance of hundreds of millions of dollars in investor funds. Although Dhanani was not charged with any wrongdoing related to the Quadriga exchange collapse, he undoubtedly brought negative attention to AC.

Fraudster Dhanani

Solidly launched in February 2022 as an automated market maker application aimed at reducing trading slippage for low-cost trading. CSO Sesta was responsible for marketing and hype, while AC was in charge of project building.

However, due to coding errors that led to the failure of the initially touted project features, AC announced he would leave the project less than three weeks after its launch. Solidly's TVL once reached $2.3 billion, but on the day he announced his exit, it plummeted by nearly $370 million, and by June, the TVL had fallen to less than $20 million.

"In terms of user expectations to make money off Solidly, they didn't achieve it; if that's their definition of a rug, I can accept it," AC said.

Solidly TVL

This is a curse for AC; Token Brice said AC also accepted the term curse. "Andre Cronje was able to create a new type of product that didn't exist before, but he rushed through the execution and messed it up," Token Brice bluntly stated.

Visser had a different view: "Over-reliance on system participants who don't understand code is the source of all trouble. If all players and partners were as reliable as AC's code, he could be the master of the universe."

The Fall

In April 2022, AC did something incredible: he called for regulation of DeFi.

Regulation is contrary to the autonomy and decentralization that DeFi represents. For a community battered by the Terra/Luna collapse and the Solidly incident, the call for regulation became the last straw. But there was also significant opposition; an angry crowd flooded into his Telegram and Twitter, and AC announced his retirement again, deleting his Twitter, and everything fell silent.

But in October, he broke the silence again, calling for legal protections in DeFi to match those in traditional finance. This occurred weeks after the FTX collapse, as more and more regulators formally entered the crypto industry's oversight.

AC stated, "The intersection of CeFi and DeFi needs to be regulated." Once a project goes live, it is like the internet itself—there is no owner, no boss. "In the face of potential contract regulation, regulators will tell you, 'Now you need to stop the contracts you are developing'; then you tell them, 'I can't stop'; then they say, 'Well, if you don't stop, we'll put you in jail'; I can't stop; I can't do anything except completely destroy the internet."

AC reflected on his achievements during the summer of DeFi and how much control he or anyone else could have.

He said all his money came from investing in cryptocurrencies and liquidity mining, noting that his name was often mentioned alongside Do Kwon, founder of the blockchain platform Terraform Labs (who has an arrest warrant in South Korea), and Kyle Davies and Su Zhu, co-founders of the multi-billion dollar crypto hedge fund Three Arrows Capital (which collapsed in July).

"This tears at my soul; I have given everything for this industry, trying to show them a new model for launching tokens," AC said, "And is this evaluation my ultimate legacy?"

Despite facing strong opposition, he still planned to make a comeback and announced in October that he would collaborate with Fantom again, with its "war fund" replenished with about $100 million in stablecoins.

Another major project may help explain his recent calls for regulation. Visser said he was planning with AC to establish Universal Assets Bank—a regulated international cryptocurrency bank. "We will build the future of the financial industry," Visser admitted.

However, Andre Cronje seems uncertain about his future; the life on the edge has left him with many scars. "I have no confidence in anyone; I no longer trust anyone; I believe that unless there is a transactional motive, no one's actions will align with the best interests of others."

I cannot tell if he is talking about himself.

When asked what advice he would give to developers taking his place, he said it was best not to do so; if you do, please remain anonymous and protect your privacy.

He warned, "Regulation of developers will become increasingly stringent; once you deploy these contracts, you can't make any changes to them; otherwise, you basically mean you need to go to jail."