The price of decentralized finance (DeFi) protocol Umami Finance's native token dropped by nearly 50% over the past 24 hours amid changes to the mechanism of its native UMAMI token, prompting dismay among community members.
DeFi relies on smart contracts instead of intermediaries to provide users with financial services such as lending and borrowing.
According to messages on social forum Discord seen by CoinDesk, an Umami developer said team members had resigned from Umami Labs LLC but the move was to push Umami “back towards decentralization and a [decentralized autonomous organization] structure.”
“CEO has dumped all of his tokens via his address here, 0x21dF3E7371A58eB0e2248F1362eB5fa01fC9B34F,” the developer said. The owner of the wallet address appears to have swapped UMAMI holdings for hundreds of thousands of dollars, blockchain data on Etherscan shows.
The Abritrum-based UMAMI traded at $11 in European hours on Thursday, down from Wednesday's high of $22. It is down over 90% from its record high of $162 in December 2021.
Umami fashioned itself as an institutional DeFi player with yield products tailored to financial institutions. The products encompassed low-risk strategies that yield relatively better rewards than those offered by highly-regulated centralized finance platforms.
These yields were intended to be offered on deposits of bitcoin (BTC), ether (ETH) and USD coin (USDC).
However, Umami temporarily stopped all payouts to token holders in early February, citing regulatory considerations, messages in Umami’s Discord channel show. This caused some discourse among community members, who said the product seem to do the opposite of what it earlier told potential token investors.
Umami operated similarly to a traditional company while offering a DeFi product. Its team members were known, its operating expenses were published each month publicly and it claimed to operate in “full compliance with jurisdictional rules in all of its markets,” as per technical documents.
As such, Umami developers said the protocol's treasury assets remained safe and were in control of signatories who would obey the direction of Umami DAO and its token holders
“Team plans to move forward with a DAO structure and release vaults as planned with the Umami token having the same revenue claim as promised,” the developer wrote on Discord, stating the code required to run and operate Umami remained in control of the DAO.
“Next steps: Draft a proposal to the Umami DAO instating the Umami team (minus Ex-CEO) with the guidance of the DAO to move forward with Umami and launch vaults,” the developer added.
However, some Crypto Twitter users reported withdrawal issues as of European morning hours on Thursday.
Meanwhile, Umami Labs LLC said it was working on a detailed response to the issue in an emailed statement to CoinDesk.
"CoinDesk's article contains numerous factual inaccuracies and omits critical information. Umami Labs is working with its legal representatives on a detailed response," Umami Labs LLC said.
UPDATE (Feb. 10, 2023, 05:28 UTC): Adds statement from Umami Labs LLC.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.