Ethena faces heat for alleged misuse of 180M ENA tokens to farm Sats

Key Takeaways

•  Crypto investigator Nomad reported that Ethena staked 180 million ENA tokens for its Season 3 crypto-farming event
• Nomad’s analysis claimed that Ethena Labs holds around 25% of the total staked ENA (SENA) tokens, allegedly using these holdings to generate Sats through activities on its platform

Ethena Labs, a synthetic dollar ecosystem built on Ethereum, is facing scrutiny following revelations about its recent staking activities. On October 27, crypto investigator Nomad reported that Ethena staked 180 million ENA tokens for its Season 3 crypto-farming event, raising concerns that this move could diminish rewards for other participants.

Nomad’s analysis claimed that Ethena Labs holds around 25% of the total staked ENA (SENA) tokens, allegedly using these holdings to generate Sats through activities on its platform. “Given the uncertainty, Maelstrom has 5% of the fund in staked USDe (Ethena USD), earning roughly 13%,” said Arthur Hayes, co-founder of BitMEX, in an email to CoinDesk. He noted that the fund is maintaining substantial long positions in Bitcoin, Ether, and other cryptocurrencies.

Ethena’s USDe functions as a synthetic dollar, utilizing a combination of collateralized stablecoins and a hedging strategy to uphold its peg to the U.S. dollar. Users who stake USDe or acquire staked USDe (sUSDe) gain automatic access to protocol rewards.

The fund’s approach aims to shield against market volatility leading up to the U.S. presidential election, with results anticipated on November 8.

Maelstrom, which is overseen by Hayes’ family office, seeks to invest in companies that will play a crucial role in the next wave of decentralized finance. In addition to managing the fund, Hayes publishes the monthly newsletter Crypto Trader Digest.

Critics are expressing concerns that Ethena’s substantial stake in SENA may lead to lower returns for regular stakers, raising questions about the integrity of the Ethena team. The company has yet to make a public statement regarding these allegations, only maintaining that the staked ENA tokens are legally obtained foundation tokens.

Nomad’s report highlighted the movement of ENA tokens to six wallet addresses linked to Ethena Labs, which reportedly received the 180 million ENA tokens from Coinbase Prime Custody earlier this month. These wallets have shown active participation in Ethena’s reward system and have appeared on its Sats farming leaderboard.

Additionally, the report noted that these wallets acquired 20% of Ethereal (ETRL) points, a reward intended for contributors, prompting calls for Ethena Labs to address these concerns from the crypto community.

Nomad also referenced previous issues from Ethena’s earlier farming seasons, where several users experienced losses, contributing to growing skepticism about the protocol’s reward distribution and community involvement.

Ethena Labs has also formed a partnership with algorithmic trading firm Wintermute, which allows its clients to use USDe as margin for trading cryptocurrencies. This could enable clients to hedge options and other financial instruments while using USDe as collateral.