ref: Tethys Developers Are Stealing User Funds
Overview
Metis L2 operates as a permissionless, decentralized network designed to empower projects to deploy independently while fostering innovation and growth. This model emphasizes the importance of transparency and user diligence, especially in governance processes. While we actively support projects approved through the Community Ecosystem Governance (CEG) process, Metis does not control their operations or financial management.
That said, we hold ourselves to a high standard of community engagement and support. Throughout the challenges surrounding Tethys Finance, Metis went above and beyond to advocate for users, maintain transparency, and safeguard access to assets.
The recent announcement from Tethys Finance to shut down operations by January 1, 2025, has raised significant questions within the community about the state of the protocol and its governance. A community governance proposal initiated by a community member (Proposal Link) and the official announcement from Tethys Finance (Post Link) prompted this thorough report.
Timeline of Events
- Summer 2024:
- Multiple withdrawals totaling hundreds of thousands of USDC, METIS, and BTC through the upgradeVault function.
- Transactions bridged funds to the Binance Smart Chain and eventually withdrew them to Binance wallets.
- November 24, 2024: A withdrawal of 1.05M TETHYS from the Staked TETHYS RewardTracker contract raised additional concerns.
- December 5-6, 2024:
- TETHYS tokens were partially returned to the staking contract after users reported unstaking issues.
- Additional USDC was bridged from Ethereum to Metis, possibly to mitigate user withdrawal challenges.
- December 6, 2024: Tethys Finance announced its shutdown, encouraging users to unstake their funds.
Key Findings
The analysis reveals a series of fund movements and governance actions that demand scrutiny:
Governance Wallet Activity
- Staked TETHYS Withdrawals (August–November 2024):
- August 4, 2024: 1M TETHYS withdrawn (Transaction).
- August 5, 2024: 1M TETHYS withdrawn (Transaction 1, Transaction 2).
- November 24, 2024: Final 1.05M TETHYS withdrawal (Transaction).
- UpgradeVault Exploitation:
- July 5, 2024: Two withdrawals of 100K USDC each (Transaction 1, Transaction 2).
- August 4, 2024: 1.7 BTC withdrawn and returned (Withdrawal, Return).
- Asset Bridging:
- July 5, 2024: Some funds bridged from Metis to BNB Chain have been sent to Binance (Transaction 1, Transaction 2).
- December 5, 2024: 200K USDC bridged from Ethereum to Metis (Transaction).
- TETHYS Returns (December 2024):
- Partial returns of TETHYS tokens to staking contracts after user complaints:
- 1.05M TETHYS: (Transaction).
- 547.6K + 485.8K TETHYS: (Transaction 1, Transaction 2).
Metis’ Actions
When users began reporting UI issues, such as being unable to close longs and shorts, Metis promptly took the following actions:
- Community Feedback Reporting:
- Metis communicated user feedback to the Tethys team and urged them to address the concerns raised by their community.
- The Tethys team responded by sending out communication to their users, outlining the steps required to resolve the reported issues. (Reference: Tethys Telegram Message)
- Continuous Support:
- Despite weeks passing without a resolution, Metis offered various forms of assistance to the Tethys team, including development support.
- The Tethys team reassured Metis that they were actively working on a new version (V3) and declined additional help.
These actions reflect Metis’s commitment to its community, going beyond its decentralized role to protect user interests wherever possible.
Next Steps for Tethys Users
For Tethys users, please follow these steps:
- Unstaking and Withdrawals:
Ensure you unstake and withdraw any remaining assets before the shutdown date.
- Contact Tethys Support:
Reach out to the Tethys Finance community group for assistance. Report any cases when you can’t unstake or withdraw in this group.
- Community Discussions:
Engage in the Metis governance forum at forum.ceg.vote to share feedback and discuss future safeguards.
Metis has already requested that the Tethys team remain available to assist users during this transition.
Moving Forward
Metis remains dedicated to supporting a thriving, decentralized economy. Over 150 projects have successfully passed through the CEG process, demonstrating the ecosystem’s strength and diversity. While challenges may arise with individual projects, we are committed to learning from these events and continuously improving governance processes to enhance transparency and user protection.
We encourage all community members to participate actively in governance discussions and decisions to help shape the future of Metis.
Thank you for your trust and engagement as we work together to grow a resilient decentralized ecosystem.
