Daily Briefing: The Cursed Protocol

Sushi started strong but quickly went off the rails.

Bad Mangement

When I began my crypto journey in late 2020, one of the first tokens to catch my eye was SUSHI. I had no idea what DeFi was or how smart contracts worked, but the sleek purple and pink ombre logo stood out among the rest. From that initial curiosity, I learned about the project’s colorful history, “the DeFi summer” of 2020, and why decentralized finance is so important.

Sushi is one of many so-called “decentralized exchanges”—permissionless protocols that let DeFi users swap tokens without going through a centralized exchange or middleman. Here, liquidity providers deposit tokens into trading pools and earn a share of the swap fees for locking up their assets. The beauty of decentralized exchanges like Sushi is that they can function independently from the people who created their smart contracts.

Sushi was hit by its first major scandal early in its lifetime. After roaring into the DeFi space and attracting liquidity through its generous SUSHI token emissions, the protocol’s pseudonymous creator, known as Chef Nomi, dumped $14 million worth of SUSHI from the protocol’s development fund before leaving the project. Although Nomi later returned the funds to the Sushi treasury, many users became wary of the project’s management, which set a bad precedent.

As DeFi grew throughout 2021, so did the drama surrounding Sushi. In September, 0xMaki, often cited as one of the people responsible for saving the protocol after Chef Nomi’s departure, suddenly left the Sushi team. It would later be revealed that 0xMaki was forcibly removed from Sushi as part of an alleged hostile takeover. Other notable names to leave the project included core developers Mudit Gupta, 0xKeno, and LevX.

Sushi’s then CTO Joseph Delong also faced pressure from several internal disputes due to the fracturing of the protocol’s team. Sushi’s business development lead, AG, accused Delong of abuses of power—before being fired “for a continued pattern of behavior that made for a toxic workplace.” A rekt.news investigation then accused Sushi team members of spending treasury funds on steak and lobster dinners, gaming an allocation of tokens from MISO’s BitDAO sale, and day trading using protocol funds. Delong resigned in December 2021.

For much of 2022, Sushi has been stuck in limbo. A plan to unite the protocol with Daniele Sestagalli’s abracadabra.money gave the SUSHI token a brief price bump, but this fell through after it was revealed that serial scammer Michael Patryn (otherwise known as 0xSifu) was the treasury manager for one of Sestagalli’s other projects. However, a recent vote for a new Sushi CEO promised to breathe life back into the project and put it on a new trajectory.

Unfortunately, Sushi just cannot catch a break. Whether the protocol is suffering from rampant corruption or incompetence is unclear, but SUSHI token holders opted to elect Jared Grey as the protocol’s new CEO. Beyond a certain silly meme that’s done the rounds on CT over the past 24 hours, it’s not hard to uncover Grey’s controversial past with just a bit of digging. He’s been at the head of several failed projects, one of which involved Grey’s business partner Kevin Collmer
stealing funds from customer accounts. What’s more, two venture capital firms—GoldenTree and Cumberland—carried the vote to put Grey in charge, making up over 61% of the total voting power. I’ll leave you all to draw your own conclusions from this.

Sushi was once a promising protocol and a real rival to the leading decentralized exchange Uniswap. Despite all the drama, Sushi still receives a decent amount of trading volume and is the 19th biggest DeFi protocol by total value locked. Compared to other exchanges, Sushi looks undervalued when considering the ratio between the amount of trading volume it handles and its token price. Although Sushi will likely remain a core protocol in the broader DeFi ecosystem, its history of poor management and controversy will be incredibly hard to shed.

Disclosure: At the time of writing, the author of this piece owned SUSHI, ETH, and several other cryptocurrencies. The information contained in this article is for educational purposes only and should not be considered investment advice.