Stargate Finance to reissue STG tokens amid risk of Alameda wallet hack

StargateDAO has passed a proposal to reissue its STG tokens to all holders. The decision is meant to “eliminate the risk of illegitimate STG transfers from compromised Alamada wallets.”

Following a DAO voting process that ended on Monday morning, the popular cross-chain protocol will reissue 1 billion STG tokens starting on March 15. According to the proposal, which was presented to the community last Wednesday, Stargate Finance currently “faces a significant threat to its POL and to the security of token holders due to potential security issues within Alameda Research (Alameda).”

As a backstory, the now-defunct Alameda Research purchased 10% (100 million) of the total STG supply during Stargate’s public sale in March 2022. The trading firm had earlier made a commitment to lock up the tokens until March 2025. However, there has been a lot of controversy and drama around the operations of the firm.

In particular, there have been reports that Alameda’s wallet has been compromised in the wake of the recent collapse of FTX and its bankruptcy filings. On December 28, 2022, Arkham Intelligence raised an alarm about a malicious actor that had transferred over $1.7 million from the firm’s wallet via several crypto mixers. The recent on-chain transfers suggest that Alameda may not be in full control of its wallet, raising concerns that some tokens, including locked-up STG, may be stolen and dumped into the market.

Without a token re-issuance, a malicious actor with access to Alameda’s private keys could claim the Stargate tokens from the contract as they vest and misappropriate them as they seem to have with other funds.

The proposal was widely welcomed by members of the DAO. However, there were some concerns about how the decision will affect VeSTG holders. That said, over 96% of veSTG holders were in support of the initiative.