Arbitrum proposes to ban suspected abuse of grants

Core Points

The proposal aims to limit eligibility for future DAO projects. Each project needs to respond before September 10. Three separate Snapshot votes may be held later. The ban will not freeze wallet funds. Identity evidence will become the core focus of review. The measure restricts financial support, not network access.

The Arbitrum Supervisory Board proposes to permanently exclude Good Entry, Limitless and APX Finance (formerly ApolloX) from participating in future Arbitrum DAO project plans.

No injunction has been passed so far, and relevant project parties have until September 10 to state their positions. The committee said it would seek a vote if the project party's explanation was insufficient and the corresponding funds were not returned. If this is true, the committee plans to hold a Snapshot vote for each project. Once the vote is successful, the projects and associated personnel involved will be disqualified from receiving future grants, incentive plans and other opportunities supported by the DAO.

This measure does not include on-chain operations. It does not confiscate tokens, close smart contracts, or prevent wallets from interacting with Arbitrum. The practical effect is to prevent designated recipients from applying for future DAO funds. For a team that closes a product and returns it under a new brand, this restriction is more substantial than a ban on the names of the deactivated agreement.

In addition, the scope of financial support is also expanding. For example, based on our analysis of how Robinhood Chain activities feed back the Arbitrum ecosystem, Robinhood Chain directs 8% of its negotiated net revenue to the Arbitrum DAO treasury.

Scope of impact of the ban

Successful implementation of the ban will affect:

• Eligibility for participation in future grants, incentives and other projects funded or managed by the Arbitrum DAO.

Successful implementation of the ban will not affect:

• Wallet ownership, token balances, smart contract deployments or general behavior using the Arbitrum public network.

Establish an inspection mechanism to recover funds and curb repeated abuse

The Arbitrum created the Watchdog Program to reward verifiable abuse reports and recover funds. Its framework classifies suspected large-scale intentional abuse, including falsifying deliverables or theft, as a serious level.

As of September 2, the commission said the program had received 90 reports, recovered approximately 532,000 ARBs, and distributed approximately 268,000 ARBs to whistleblowers as bonuses. The proposed exclusions would add longer-term consequences when simple recovery of funds cannot solve the problem: recipients convicted of abusing funds could lose their eligibility for future DAO support.

Three cases, one question about future qualifications

These three investigations describe different forms of suspected abuse. The following is the Commission's evidence and the amount involved in each case:

Details of the Commission's Allegations in Various Cases

Good Entry
allegedly allocated 142,839 ARBs to 1,032 unqualified users and was suspected of team-related incentive mining.

Limitless
allegedly exchanged 75,000 ARBs for USDC and transferred them from Arbitrum to the Base network.

APX Finance
allegedly has 239,714 ARBs linked to unreturned funds, delayed distribution, and suspected team-related Sybil (witch attack) activity.

These allegations have not yet become a DAO-approved finding and are not of such severity that the three cases are identical. Token holders need to weigh available evidence, any explanations from the project party, and the status of the funds before deciding whether there is reason to exclude them from future DAO projects.

Project name easy to deprecate

Good Entry is described as no longer operating, and Limitless appears to have also ceased operating. Therefore, a ban on these two project brands alone has limited value. Teams can close one brand, form another brand, and then return to the same funding ecosystem.

Therefore, the committee proposes to extend the ban to founders, current team members and associated contributors. This range is set to prevent simple rebranding, but it also makes accountability the center of the vote. Token holders need to consider what evidence connects the wallet or contributor to the person who controls the relevant grant decision.

This does not mean that all associations should have the same weight. The role of a former contractor, investor or community member may be very different from that of the person who controls the treasury purse or distributes funds. If the DAO wants to develop an exclusion policy that is both enforceable and fair, it needs to decide how to distinguish these roles.

A decision will be made on September 10 whether the case will enter the voting stage.

The current process gives each project one week to respond in the governance thread. If the committee remains dissatisfied and the funds have not been returned, three off-chain votes are expected to be issued on September 10, although the timetable is marked as tentative.

Each Snapshot poll will ask whether the designated project, and where applicable its founders, team members and affiliates, should be permanently banned from participating in future Arbitrum DAO projects. The proposal states that these votes will serve as the final social consensus decision for the DAO; they can be implemented without on-chain transactions.

The project party's response, any repayments, and the committee's evidence of team affiliation will determine whether the case goes to the voting stage. They will also demonstrate whether Arbitrum can consistently apply the permanent injunction standard across three distinct allegations.

These allegations were included in the supervisory committee's proposal. No bans have been approved so that designated projects can respond before any Snapshot vote.