By disabling user withdrawals, Iron Bank has taken users’ funds. The bad debt from exploited funds is a separate matter from users’ funds held in trust by Iron Bank, as these funds are not Alpha’s. Seizing users’ funds is not the solution and should not be a solution to any problem because it is as if a custodian seizes money held in its trust. Iron Bank, to Alpha Homora's shock, has revealed itself to have centralized control over the network, and therefore it is acting similarly to a centralized lending platform.
While Alpha Homora is legally advised to take this negotiation directly with Iron Bank, we choose to put forth a solution for the bad debt publicly in hope that Iron Bank will release customers’ funds immediately. By doing so, we are at risk on other fronts, but we have chosen accept those risks to help users recoup their deposits as soon as possible.
Even though this bad debt is a debt between the two protocols because of the protocol-to-protocol mechanism, the bad debt has involved users the moment Iron Bank misappropriated user funds. Thus, Alpha Homora, as a protocol that integrates with Iron Bank, has no choice but to resolve the problem with users directly because Iron Bank has not shown willingness to resolve the issue together as we had agreed on since the start.
Alpha Homora will continue to pursue legal action against this unethical wrongdoing and ensure what Iron Bank has done will not be the new, lower standard of DeFi.
Alpha Homora is proposing the below solutions, which work together as a package, to Iron Bank so that Iron Bank can return users' deposits. However, this is only the proposed solution, and hope to discuss with Iron Bank to come to final solution.
- Iron Bank returns customer’s funds that are not on Ethereum.
- Out of the ~$41M on Ethereum, Iron Bank is to transfer ~$11M to users. ~$11M represents the amount of users’ deposits net bad debt and not including interest accrued.
- For the remaining ~$30M, Alpha Homora will share details to the community on how it will be handled within 1 week after Iron Bank agrees to the above solutions.
Urge Iron Bank to Discuss
It is clear that there are many detailed components that have to be aligned between the two protocols in order to proceed with this solution package, including but not limited to specific numbers, interests accrued, asset types, processes. An Open Letter is not an efficient way of communication with such a high turnaround time. We urge Iron Bank to discuss the details immediately, so that both protocols can resolve this issue once and for all.
Our legal pursuance continues as customers’ funds continue to remain at Iron Bank’s appropriation. The sooner the two protocols discuss, the sooner solution is finalized, the sooner users get their deposits back, and the sooner legal pursuance will end.
1st Open Letter: https://blog.alphaventuredao.io/an-open-letter-to-iron-bank/
2nd Open Letter: https://blog.alphaventuredao.io/second-open-letter-to-iron-bank/
Update to community after 2nd open letter: https://twitter.com/Alpha_HomoraV2/status/1632018212551557120?s=20