Layer2DAO response to allegations from Velodrome [November 2022]

[This message was originally posted on Optimism Discord #gov-general on Nov 9 2022. Replicating it here per the request of Lavande]

We have been working with the OP Foundation and provided them with all requested information and will continue to work with them as needed. All assets have been returned to Optimism and all OP tokens repurchased.

As noted by @lavande :sparkles::red_circle: there was not a no-sale policy in place when we received our grant and at the time. That being said, we had no intentions of moving any OP assets off chain under normal circumstances. To clarify, this is the event that caused our team to jump into action and move all our assets: Optimism Token Flash Crashes 10% on False Rumors of a Major Hack

At the time DAO team members reached out to the Foundation and other members in the community and received very little information or understanding of what was happening. While the exploit proved to be false, no one knew it as it was happening nor the extent to which it would affect the chain. We reacted quickly in the moment while also continuing to follow through on our governance proposal. It was decided to protect the assets in order to compete the original proposal should there be a larger issue with the chain. Hindsight is 20/20 and our team agrees that once the dust had settled the tokens should have been repurchased in the days following. Instead, we move asset back bit-by-bit and continued to build out the NFT and the OPIncubator program during this time with great success. We also launched two other NFTs on OP and continued to build on the chain. As a DAO we are focused on driving TVL and usage to L2s, and Optimism is a big part of our focus.

As I explained in my post on the gov forum earlier, we’ve been steadily buying back OP since the initial sale in order to fulfill the proposal obligations (and we were going to continue that until all OP was repurchased). We also have been distributing those tokens as part of fulfilling our proposal. 91,050 OP as of 11/9/22 has been spent in accordance with the proposal and the balance remains in the multi-sig as you have already seen. Last week we awarded an additional 27.5k OP tokens in our second round of the OPIncubator program that will go out shortly to the grant recipient project.

There continues to be a dialogue that somehow Layer2DAO made a $200k profit in this process. The statement in categorically false and the narrative is being pushed while knowingly being false in order to harm Layer2DAO as part of a personal vendetta by Velodrome team members against one of our team members (as they confirmed on the governance call yesterday). The attached spreadsheet shows all the transaction amounts, as well as the delta in value of the ETH opposed to OP. The drop in value of ETH is roughly 30% and the drop in OP token value between sale and repurchase was 32.27%. As you can see from the repurchasing line items it was often down at a loss to the original sale value as ETH dropped faster in value up until October. It has always been our intent to repurchase all tokens and fulfill our obligations to our governance fund proposal. The spreadsheet does not include bridging and swap fees, which have been substantial.

We have continued to develop new projects in the OP space and will continue to do so. The intimidation and fear mongering towards other protocols by Velodrome team members seems counter productive to the Foundation’s goals for OP governance and the health of the community. We really hope the larger governance community and the OP Foundation can see through this and stop OP governance from being turned into a playground for bad faith actors who want to use it for carrying out their personal vendettas.

Our goal is to be positive contributors to the Ethereum Layer 2 community, and have been cooperating with the OP Foundation every step along the way and provided complete transparency. I am happy to answer any further good faith questions directly.


Here’s a tick-tock describing the moments leading up to the sale of the OP that in my opinion undercuts this claim. L2DAO had gotten proof that OP had not been compromised and went ahead anyway with selling the OP and bridging the funds. This action had not been disclosed until I’d uncovered it months later.

These facts raise questions about their motivations. Their pretext was a token hack - so why bridge and start immediately shilling ETH and Arbitrum?

And why do it after weeks of LPing the token, which itself seems inconsistent with the spirit of these grants?

And why not immediately bridge back, instead keeping the funds on Arbitrum?

And why not tell anyone?

See below:

Wallets of interest

L2DAO deployer on Optimism (Deployer)

L2DAO recipient of grant funds (Grantee)

L2DAO Arbitrum treasury (Treasury): where 50mm L2DAO resided on OP

L2StateofMind NFT deployer (SoM)

Initial recipient of L2StateofMind funds

Events around bridging

Aug-17-2022 04:45:00 PM +UTC

Optimism transfers large number of OP to EOAs; the ‘alarming exploit’

Aug-17-2022 08:29:00 PM +UTC

Weston Nelson asks in OP discord:

Discord message ID: 1009559717816832090

Aug-17-2022 08:45:00 PM +UTC

Diligit responds not personally having info

Discord message ID: 1009567227944652942

Aug-17-2022 08:53:00 PM +UTC

Weston specifies the transfer in question

Aug-17-2022 08:59:00 PM +UTC

Diligit says these are Foundation accounts

Aug-17-2022 09:14:00 PM +UTC

Weston gets into miscommunication with Diligit, says transaction is ‘not a good look’

Aug-17-2022 09:18:00 PM +UTC

Diligit explains that there’d previously been test transfers to these accounts, confirming transaction was intended.

Aug-17-2022 09:26:55 PM +UTC

Grantee wallet transfers 280,957 OP to Deployer

Aug-17-2022 09:30:11 PM +UTC

50k OP swapped to 35.69 ETH

Aug-17-2022 09:32:00 PM +UTC

Optimism Foundation tweets clarification of transaction as routine

Aug-17-2022 09:34:11 PM +UTC

80k OP swapped to 57.52 ETH

Aug-17-2022 09:37:27 PM +UTC

80k OP swapped to 57.64 ETH

Aug-17-2022 09:38:27 PM +UTC

70,957 OP swapped to 51.31 ETH

Aug-17-2022 09:39:00 PM +UTC

Aug-17-2022 09:46:26 PM +UTC

Test bridge of 1e to same address on Arbitrum

Aug-17-2022 09:51:00 PM +UTC

Aug-17-2022 09:53:34 PM +UTC

202 ETH bridged from Deployer to Arbitrum via Socket Protocol

Aug-17-2022 10:07:19 PM +UTC

On Arbitrum: Deployer sends 100 ETH to Treasury

Aug-17-2022 10:07:53 PM +UTC

Deployer sends 102 ETH to Treasury

Aug-18-2022 00:41:00 AM +UTC

Weston bullish $ETH


Weston shilling Arbitrum

Aug-18-2022 05:26:00 AM +UTC

Weston shilling Arbitrum

Aug-18-2022 08:57:00 AM +UTC

Weston re-amplifies Aug-17-2022 09:39:00 PM +UTC tweet with the following:

Aug-18-2022 10:34:00 AM +UTC

Weston bullish $ETH

Aug-18-2022 10:43 AM +UTC

Weston shilling $ETH

Aug-18-2022 05:28:00 PM +UTC

Weston claiming to have “followed up with other parties” regarding how previous day’s tx was handled. Still asking for “just info.”

Starts sending OP back to other one


God bless you weston


CONGRATULATIONS L2DAO members the L2DAO Deployer contract and the L2DAO Treasury addresses qualified for the Arbitrum airdrop! 11750 Arbitrum tokens!

Wow! 75000 Arbitrum tokens to L2DAO from Arbitrum and now these tokens!

When announcement to L2DAO members on Discord Weston?

Maybe other addresses used to farm on Arbitrum with ETH obtained from L2DAO selling OP qualify for Arbitrum airdrop too? Have you checked Weston? Maybe L2DAO members can verify if those addresses qualify? Lucky L2DAO members!


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