Bybit calls on DeFi protocol ParaSwap to refund its fees for processing transactions involving stolen assets

What’s new? Bybit has called on the ParaSwap DeFi protocol community to refund fees received for processing hackers’ transactions with assets stolen from the exchange. On March 4, it suggested on ParaSwap’s Decentralized Autonomous Organization (DAO) forum that 44,67 wrapped Ethereum (wETH) worth nearly $100 000 be frozen and returned to an unknown wallet.

Source: X.com

What else is known? The proposal initially drew skepticism, with several DAO members calling for verification before pushing forward with the proposal. On March 5, Bybit confirmed in its official X account that it was behind the refund offer.

The refund action sparked debate among DAO members, many of whom wondered about the implications of possible refund fees.

A ParaSwap DAO member under the nickname Ignas noted in his X-account that a refund would be an expression of support for an industry player affected by the hack. In addition, keeping the funds linked to the hackers could bring increased regulatory attention to the project and its legal implications.

Source: X.com

At the same time, he acknowledged that refunds would set a dangerous precedent for the DeFi industry:

“Code is law. The DAO earned the fees legitimately via smart contracts. And if funds are returned now, what about future cases?”

He also noted that such an initiative could have an impact on the THORChain protocol, which hackers used to convert stolen funds, bringing its trading volume since the Bybit hack to $5,5 billion on March 5, generating $5 million in fees.

If Bybit submits a similar refund request from THORChain, the exchange could recover significantly more funds.

Another DAO member under the nickname SEED Gov outlined three possible courses of action: refund the full amount, deny the request, or negotiate a structured refund that includes a 10% retention fee under the exchange’s bug-bounty program.

The proposal has sparked controversy on the ParaSwap DAO forum. Some community members are pushing for a full refund, while others are pushing for a partial refund. Another part of the community opposes the refund, noting that the project will “damage its reputation” if it agrees to return the funds.

One discussant recalled a situation in 2013 when a hacker-affected protocol requested that ParaSwap reimburse fees for processing hacker transactions. The request was denied then, and, he said, “there is no reason to rule it otherwise this time.”

The February 21 hack caused Bybit to lose $1,46 billion, the largest single theft in history. According to the FBI and information security experts, the DPRK-based Lazarus hacking group, which funnels funds to finance the government’s weapons program, was behind the hack.

As noted by experts at the Arkham Intelligence analytics platform, the hackers had completely laundered the stolen funds as of March 5.