Swerve Finance Swerves Finely

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Swerve Finance

The story goes that a bunch of venture capitalists decided to create a fork of the Curve protocol, called Swerve. They copied the code with minimal change. They had huge amounts of money to start up the liquidity. And a great marketing plan - pretend to be a single anonymous developer and fake a fair launch.

Except that they launched on a transparent blockchain, and poorly managed the project. Most of the capital fled, and anyone holding the token faced losses, after settings were adjusted poorly. The whole thing took a couple of weeks to play out.

It seems that the team split up and a new site was formed, which is running presently. The project Github is closed down. There is no activity since November on Discord or Twitter. Total value locked are minimal presently.

This is a global/international case not involving a specific country.

About Swerve Finance

"Swerve is a community-owned and governed fork of Curve Finance, an AMM-based decentalized exchange specializing in efficient stablecoin swaps. Swerve was originally launched in 2020 with just one pool of stablecoins (DAI, USDC, USDT and TUSD) which allowed Swerve to cut gas costs down dramatically for interactions."

"When users provide liquidity to Swerve, they receive swUSD tokens which can be staked in the Swerve DAO to earn SWRV tokens. 100% of SWRV tokens were distributed and "farmed" by the community. Swerve DAO members propose and vote on protocol changes such as adding new liquidity pools."

"Both Swerve and Curve are decentralized exchange protocols for trading stablecoins. The key difference between the two protocols is that Swerve is "100% community-owned and governed," meaning its users started generating SWRV tokens with their deposits from day one. Curve, on the other hand, did not launch its CRV token on day one. In fact, Curve was forced to launch CRV earlier than its planned schedule, after an anonymous developer front run and deployed smart contracts without the knowledge of the Curve team."

"Swerve Finance, an unaudited fork of decentralized finance (DeFi) protocol Curve Finance, has amassed over 40% of Curve's deposits within four days of its launch."

"Swerve Finance is not the fair-launch, community-owned fork that they claim to be. They simply used the fair launch narrative as a cash grab scheme. If there was any long-term vision to the plan, the past two weeks of excess distribution would never have been included."

"Swerve was simply a lazy fork with Curve’s founder token allocation stripped out, only to be reallocated amongst whales and VCs through a quick 25 minute “UI fault” premine, and a 2 week token binge."

"If the code was unaudited, how did they gain $31,000,000 in deposits in the first 35 minutes, from just 37 different addresses??? That’s 37 whales who deposited an average of ~$837,000 EACH into this “anonymous” developer’s project..."

"Framework Ventures had over $6M in Swerve for the majority of the first two weeks. Pantera Capital and Three Arrows were also quick to promote Swerve as a "fair launch" Curve."

"When the Swerve team tried to start making changes to the protocol, it was either ignorance or apathy that allowed for the passing of SIP-5, which aimed to reduce the A factor from 1000 to 100, in a misguided attempt to increase pool reserves of DAI."

"Changing the A factor so drastically would change the virtual prices so much that it would allow for a huge arbitrage opportunity, resulting in a permanent loss for the ~$850,000,000 TVL in the pool at that time."

"Even when members of the chat calculated the loss to be around 0.8%, which at the time would have been over $8M, Swerve took no action to protect their users."

"Now the two week distribution period has ended, whales have dumped their tokens, 80% of their liquidity has left, and Swerve governance votes are struggling to pass quorum."

"Currently, things are not looking good for Swerve. They inflicted a permanent loss for their users through their own incompetence, and are currently struggling to pass quorum on any governance votes as whales have dumped their tokens and left the platform."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Swerve Finance Swerves Finely

Date	Event	Description
September 19th, 2020	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $8,000,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

Our proposal requires projects be run by known developers and subject to two independent validations prior to launch, which would tend to detect this kind of deception. The token is most likely a security, and any smart contract hot wallets would come from funds of the team or have to be insured.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.