Compound, the popular decentralized finance, or DeFi, software protocol accidentally gave out more than $ 90 million to users due to a software bug.
A "one-letter bug" in the code is allegedly to blame for what happened, but many users simply don’t care and are grateful that they’ve received what is essentially free money.
But the episode is not over yet, and most likely won’t be anytime soon.
The founder of Compound Robert Leshner has been pleading with users to return the money, but he has also issued thinly-wailed threats.
Software Bug
Leshner took to Twitter to explain what went wrong with Compound, as reported by CNBC.
"The new Comptroller contract contains a bug, causing some users to receive far too much COMP," he said in one tweet.
"There are no admin controls or community tools to disable the COMP distribution; any changes to the protocol require a 7-day governance process to make their way into production," Leshner explained.
This suggests that the situation is likely to remain unsolved for at least another week, until Compound fixes the bug.
Leshner Threatens, Pleads
Leshner has used Twitter to both threaten and plead with Compound users, stressing that they need to return the money, though it essentially belongs to them now.
"If you received a large, incorrect amount of COMP from the Compound protocol error: Please return it," he tweeted.
"Keep 10% as a white-hat. Otherwise, it’s being reported as income to the IRS, and most of you are doxxed," Leshner added, suggesting that he will expose people who refuse to return the money and report them to the authorities.
Will Anyone Return Money?
Will anyone return the money Compound mistakenly sent out? Some people probably will, according to blockchain security researcher Mudit Gupta.
"Alchemix [another DeFi protocol] had a similar incident a few months back where they gave out more rewards than intended. Almost everyone who got the extra rewards refunded the extra," Gupta said.
"This makes me optimistic that people will refund most of COMP tokens, as well, but you can never be sure," he added.
The Alchemix exchange lost just $ 4.8 million, however, which is nothing compared to the $ 90 million Compound lost.
Will Leshner’s Threats Work?
What if Leshner actually reported those who are refusing to return the money to the IRS?
According to Shehan Chandrasekera, the head of tax strategy at crypto tax software company CoinTracker.io, it is true that section 61 of the IRS code defines income "very broadly."
"If you received a large sum from this error and decide to keep it, that would be considered income," Chandrasekera said.
Per Cornell, the IRS defines gross income as "all income from whatever source derived," including royalties, dividends, gains from business, and so on.
