Investment Fund Allegedly Conducts Sybil Attack for Airdrop Gains on ether.fi

The initial investment fund in ether.fi, Arrington Capital, is reported to have created 10 wallets to "farm airdrops" on ether.fi, receiving a total of 200,498 ETHFI tokens and subsequently transferring them to Binance.

Investment Fund Allegedly Conducts Sybil Attack for Airdrop Gains on ether.fi

According to findings from Nansen, in February, Arrington Capital leveraged ether.fi's airdrop information to stake 5,000 eETH and allocated them across 10 wallets, each holding 500 eETH. This strategy enabled the investment fund to receive 200,498 ETHFI tokens in airdrops by March 18th.

Subsequently, these tokens were transferred to Binance, signaling profit-taking actions.

Arrington Capital's actions have sparked considerable debate within the crypto community. Some have accused the investment fund of conducting a Sybil Attack on a project they are invested in. Others view this as a normal strategy to explore new revenue streams.

Regarding ether.fi, the project surprisingly defended Arrington, stating that the fund accurately disclosed their staking strategy to ether.fi. According to ether.fi, Arrington belongs to a group of top-tier investors subject to a gradual token release over three months. Therefore, multiple wallets do not necessarily imply additional gains.

The project further stated in their post on X:

"These assets, including ETHFI tokens, constitute a very small portion of Arrington's overall position and serve as part of a liquidity reserve traded frequently, hence the assets being moved to Binance."

Arrington Capital also denied conducting a Sybil Attack on EtherFi, clarifying:

"This is not a fraudulent attack exploiting the protocol's airdrop. Each account exceeded the minimum value threshold, thus the airdrop distribution was linear. This means the total ETHFI tokens airdropped to our wallets are proportional to the amount of eETH held in each."

The controversy escalated further when critics claimed Arrington deliberately divided tokens across 10 wallets to circumvent rules that wallets holding more than 25,000 ETHFI would receive airdrops gradually over three months. However, ether.fi itself clarified that Arrington was unaware of this threshold and distribution timeline.

Earlier, another crypto magnate, Justin Sun, injected $480 million into ether.fi just two days before the airdrop announcement, fulfilling the conditions to receive a substantial amount of ETHFI tokens. Under community scrutiny, ether.fi decided to extend the token lock-up period for whale accounts.

The ETHFI token is currently priced at $4.3, marking a 44% increase in the past 24 hours despite the Sybil Attack controversy.

ETHFI/USDT 1H chart snapshot at 11:40 AM on March 21, 2024, on Binance