Second Open Letter to Iron Bank
On March 1st, around 8:20PM UTC+7, Iron Bank, which is a protocol spin off from the team behind C.R.E.A.M., made a config change in their protocol. This change is unilateral without notice and now prevents lenders from withdrawing their liquidity. The Alpha community and core contributors are very concerned and issued the first Open Letter, which can be found here.
After issuing the first Open Letter, we have continued to reach out to Iron Bank to get on a call to discuss a solution including how debt will be paid off, what to do with collateral, and how everyone will be made whole. They rejected having a call and asked us to share the proposed solution on Telegram.
However, according to our lawyer's advice, any proposed solution should not be in writing until it is a solution that both protocols agree to since the debt issue is between the two protocols and since Iron Bank chose to misappropriate users’ funds and hurt lenders. And as a result of their action, we don’t know what negative thing they would do that could harm even more parties based on our writing that is a solution not yet agreed upon. Only after discussing, then we are able to come to any agreement that can be translated to writing a final version. This is the action advised by our lawyer, and we started seeking legal advice since Iron Bank froze users’ funds unilaterally because we take this situation very seriously.
Response to Iron Bank’s First Open Letter
This is Iron Bank’s Open Letter. Iron Bank’s request to have all the debt repayment be transferred by March 5th is invalid and unjustified because both protocols have agreed to terms since 2021 that debt will be paid down using 20% of Alpha Homora’s protocol fees. There was no specific timeline agreed in the original agreement, and it is unjustified to simply change the terms. This shared understanding is also public on the smart contract here.
Moreover, every time Iron Bank raised a concern regarding collateral, it was a discussion to brainstorm for a solution that we both later agree upon instead of outright requesting us to top-up collateral within 3 days. Therefore, the 3-day period requirement in the original agreement to top up collateral was never enacted.
- Specifically, the agreed solution to the first time Iron Bank raised a concern was to add more collateral, which we did.
- The agreed solution to the second time Iron Bank raised a concern was to rebalance the debt.
- On 14 Feb 2023, Iron Bank asked us to come up with a solution when they raised a concern the third time, which we agreed to and asked for time to figure out. They also agreed to the next step that we take time to figure out. We did not discuss how many days Alpha had to come up with a solution. It took us 14 days to figure out a potential solution, after which we reached out to Iron Bank immediately.
Iron Bank has breached the original agreement since the moment they froze users’ funds. In the original agreement, we agreed that if collateral was not topped up within 3 days of Iron Bank’s request, Iron Bank reserves the right to liquidate a portion of the escrowed ALPHA to pay off the debt. However, Iron Bank chose to freeze users’ funds instead.
Because Iron Bank breached the agreement and now we completely lost trust in them, there is limited reason for us to continue upholding the original agreement. Therefore, if both parties cannot come to a new agreement or Iron Bank continues to withhold users’ funds, we will neither continue to transfer 20% of protocol fees to pay off the debt nor will top up any collateral.
This 2nd Open Letter will be the last attempt that we ask Iron Bank to discuss a potential solution with us on a call, a solution including how debt will be paid off, what to do with collateral, and how everyone will be made whole.
If Iron Bank does not return users’ funds or does not discuss a potential solution with us by March 5th 23.00 UTC, we will do 2 things.
- We will pursue legal action to help our users since we are aware of one of Iron Bank team members’ identities.
- We will take responsibility. Within 1 week, if this scenario were to take place, we will share details of how we will handle or even absorb the cost on behalf of users
We are also a victim of the exploit, and the funds are not with us. However, we take responsibility in solving the problem in a way that it should be - between the two protocols. Whatever concerns Iron Bank has does not entitle it to take user deposits. We will continue to push forward such that Iron Bank takes corrective action to return the lenders’ funds.