ParaSpace, a popular non-fungible token (NFT) lending project, has been hit by an internal crisis. More than a dozen employees, including COO and CBO, took control of the project’s official Twitter handle, attempted to fight back against the CEO, and deleted the CEO’s authority in the protocol. They accused the CEO of having exclusive control over the money and not providing financial data.
In a statement released via its official Twitter handle, ParaSpace stated that it had discovered that user funds had not been fully returned to the protocol after a March 18, 2023 hack. Over 50% of the funds remained unreturned, leaving a hole in the protocol treasury. The statement also revealed that funds were being administered by an EOA wallet that was unrelated to ParaSpace Insurance, and outflows had been made to various unknown wallets, as well as CEXs and Circle redemptions.
Dear ParaSpace Community,
TL;DR: There have been no malicious acts from the team. All funds are safe from Yubo, the protocol is under the full control of the team, and we have the financial means to ensure the stability of the platform.
Today, we are sharing information brought… pic.twitter.com/58M3U1uLwv
— ParaSpace (@ParaSpace_NFT) May 10, 2023
The team revealed that these parts of the protocol, including all funds on and off-chain, were under the exclusive control and management of Yubo Ruan, the CEO and CTO. The team requested access to and visibility over the financial items as they began the process of establishing ParaSpace as a legal entity, but they received delays and vague responses from Yubo.
As a result, the team secured the protocol’s multi-sig and removed Yubo, as well as any addresses not directly controlled by the team. They added two team member addresses and increased the required signatories from two to four out of five. They also removed Yubo’s access and any addresses not directly controlled by the team from emergency admin roles in the protocol. All user funds and assets are safe and cannot be accessed by Yubo.
The team requested that Yubo directly remove user funds from the user contract managed by 0x909 and transfer all funds and NFTs to the ParaSpace multi-sig. They also requested that Yubo turn over administrative control and access to all operational services and step down from his roles as CEO and CTO. However, Yubo refused to comply with the team’s requests and avoided all contact with the team.
ParaSpace assured its community that all funds were safe from Yubo, and the protocol was under the full control of the team. The team promised to rectify the issue and restore stability to the platform. They also pledged to deliver full transparency to their users.
The crisis at ParaSpace raises concerns about the internal management of blockchain projects and highlights the need for transparency and accountability in the management of user funds. The incident is a reminder that the blockchain space is not immune to internal conflicts and requires robust governance structures to ensure the safekeeping of user assets.
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