Governance Dispute Arises Over Compound DAO's Use of Reserves for COMP Acquisition

A governance delegate within the Compound DAO has challenged the legitimacy of the recent acquisition of COMP tokens using DAO-owned reserves, raising questions about compliance with governance mandates.

On September 27, delegate ugurmersin posted allegations in the Compound forum, claiming that a reserve wallet managed by the Compound Foundation acquired COMP tokens and delegated voting power to the Foundation ahead of two proposals in May 2026. The allegations suggest potential misuse of funds, although they do not conclusively prove any breach of governance rules.

Proposal 536 had authorized the stewardship of approximately 8.42 million DAI from deprecated Compound V2 reserves, stipulating that the funds remain DAO-owned and could only support protocol operations and governance continuity. The proposal explicitly prohibited discretionary trading and the use of reserves for Foundation-specific costs. The ongoing debate centers around whether the conversion of these reserves into voting power adhered to this mandate.

Bitquery's on-chain analysis, conducted on September 28, traced the movement of reserves through USDC and an exchange-linked trading desk, revealing that 344,780 COMP tokens reached the reserve wallet just 58 minutes before the voting snapshot for Proposals 580 and 582. This wallet had already delegated its voting power to the Compound Foundation, which supported the proposals. While Bitquery noted a strong connection between the outgoing funds and incoming COMP, it did not provide conclusive proof of an off-chain trade.

Despite the controversy, the results of Proposal 582, which approved a $52 million budget for the V4 program, were not affected, as no votes were cast against it. The budget allocated $14 million to a Foundation-controlled operational wallet and $38 million to a committee-managed reserve, ensuring that not all funds were under Foundation control.

The unresolved governance issue remains whether the reserve conversion and delegation were in line with Proposal 536's stipulations. While the transaction records indicate movements and voting power, they do not clarify the intent behind the actions or how the DAO should interpret the authorization.