by Aima Raza
Bybit took part in a formal request asking ParaSwap to return the fees ParaSwap earned when Lazarus Group used stolen Bybit assets to trade. On Mar. 4 ,the ParaSwap community forum received a submission seeking to freeze 44.67 Wrapped Ether valued at $100K for later return to a defined wallet address.
The DAO audience needed proof to support the request as they hesitated before approving the plan. On Mar. 5,Bybit verified through its official X account that it sent the request to help recover funds taken from the platform.
https://twitter.com/Bybit_Official/status/1897203207069425795
The call for action on this matter led to strong arguments among DAO members that spread to affect larger problems within the DeFi sector. Several market participants saw returning misused funds as a helpful approach whereas others pointed out it set damaging trends for DeFi.
Bybit Seeks Stolen Funds
On social media platform X ParaSwap DAO delegate Ignas explained the difficult situation that DeFi faces. According to Ignas when a business makes a profit from illegal activities it could hurt its image and lead to executive attention from authorities. He explained that paying back the stolen funds would weaken DeFi processes because it lets financial experts handle transaction decisions based on personal opinion.
“Code is law. The DAO earned the fees legitimately via smart contracts. And if funds are returned now, what about future cases? Sets a dangerous precedent.”
The debate reaches two other protocols because ThorSwap also processed stolen assets from Bybit. By February 27th the hackers from Bybit performed multiple protocol swaps to steal assets worth more than one billion dollars for THORChain.
THORChain made $5 million fees during its first 4 days while processing $5.4 billion of all transactions. If Bybit contacts THORChain for the refund process they may recoup substantially more funds.
Bybit Refund Sparks Debate
The ParaSwap DAO members established three response options: restoring whole funds, rejecting the request entirely, or arranging a payment where ParaSwap receives a 10% reward as per Bybit’s established bug bounty system. Some DAO members backed a structured refund plan because it would protect ParaSwap from further problems and let them keep part of the stolen funds.
Some DAO members felt that refunding Bybit would endanger ParaSwap’s reliability as an organization. Several members recalled from 2013 when another protocol asked for refund money it collected from hackers. During previous events ParaSwap did not cooperate and many members believed the decision should stay the same.
The ParaSwap DAO needs to make a critical choice that will determine how DeFi deals with illegal transactions moving forward. The choice made by ParaSwap will decide both Bybit’s chances to get back its lost money along with how the financial industry sets rules about dealing with funds obtained through cybercrimes.
#blockchain #crypto, #decentralized, #distributed, #ledger
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