Arrington Capital, an investor in EtherFi’s liquid staking protocol, received airdropped ETHFI governance tokens in multiple wallets and sold almost $700,000 worth on Binance, sidestepping a vesting schedule. The move raised suspicion within the crypto community.

According to onchain data from blockchain analytics firm Nansen, Arrington Capital minted 5,000 eETH, EtherFi’s flagship liquid staking token, about two months ago and distributed the eETH across ten addresses, each holding 500 eETH. 

On Monday, Arrington Capital claimed 200,498 ETHFI tokens in total from the ten wallets, consolidated them into one wallet, and swiftly transferred all the tokens to crypto exchange Binance, per Nansen. 

Read more: Ether.Fi’s Newly Airdropped Governance Token Already Has a $360 Million Market Cap

Arrington Capital clarified its moves in an X post, writing that its sale totaled less than $700,000 and “constitutes a very small percentage of our overall position in Ether.Fi tokens.” In its own response on X, EtherFi said that the assets represent “a very small percentage of their position and it’s part of their liquid fund which is actively traded, and that is the reason the assets were moved to Binance.”

Two Key Criticisms

Critics within the crypto community have been quick to label Arrington’s actions as a sybil attack and have expressed suspicion regarding the vesting schedule workaround.

Onchain sleuth ZachXBT called Arrington’s move a blatant sybil attack, a method by which a single entity or person uses multiple addresses to manipulate engagement on a protocol, typically aimed at securing a larger allocation of airdrop tokens. 

Arrington Capital noted in its X post that the total ETHFI tokens airdropped to their wallets equaled the amount if all eETH was in one wallet, saying on X “This was not a sybil attack and [we] did not take advantage of the protocol’s distribution.” The EtherFi team also mentioned on X how they were not surprised about Arrington splitting funds into multiple wallets. “We were told in advance about the multiple wallets,” wrote the EtherFi team on X. 

The second criticism relates to Arrington allegedly sidestepping the project’s planned vesting schedule. Addresses that were allocated more than 25,000 tokens of ETHFI were subject to a vesting schedule; by splitting their funds across several wallets, the tokens that Arrington received were not locked.

“The 25K tokens number was pretty arbitrarily decided just by looking at the top 1K wallets,” wrote Mike Silagadze, CEO of EtherFi, to Unchained over Telegram. “One of the unintended benefits was [Arrington] dodging vesting,” Silagadze noted to Unchained. 

Arrington and EtherFi both stated that the investment firm did not know about the 25,000-token threshold before details emerged from the airdrop announcement. Arrington partner Keli Callagha, wrote in an email to Unchained that “We learned about the airdrop at the same time as the community and everyone else with public statements from Ether.Fi.” Silagadze wrote, “Arrington team was not aware of this [the 25K threshold], because the decision to do vesting was a last minute game-time decision.”

Not everyone is convinced. “It is disappointing to see Arrington Capital say that they ‘did not take advantage of the protocol’s distribution methodology’ when they split up funds into multiple wallets bypassing the >25K tier which avoided vesting,” ZackXBT wrote in a private message to Unchained. “I find it suspicious they perfectly circumvented the distribution methodology yet also happen to be an investor.”

Martin Lee, content lead at blockchain analytics firm Nansen, told Unchained: “Arrington XRP Capital depositing the highest amount possible across multiple wallets without being subject to a vesting schedule does suggest a level of knowledge of the ceiling and optimizing for it… their staking patterns within the protocol being heavily optimized when compared to the eventual airdrop criteria did catch our attention.” 

EtherFi’s Silagadze noted that “we didn’t think to go back and merge wallets belonging to the same whales to do aggregate vesting. It was just an oversight because of how quick the whole token launch process was. In retrospect, we should have done that.”