The U.S. Department of Justice is reportedly conducting an investigation into Ian and Dylan Macalinao, the founders of Solana-based stablecoin exchange Saber Labs, according to a January 11th report.
The U.S. DOJ has initiated an investigation in response to an August report stating that the brothers allegedly utilized 11 different pseudonyms to establish an interconnected network of financial products. It resulted in crypto deposits being counted multiple times by moving tokens between these pseudonyms.
Solana Saber’s Architect Creates Web To Interlock DeFi Protocols
According to the August report, a cryptocurrency user known as Saint Eclectic had suspicions about the newest decentralized finance (DeFi) app, Sunny Aggregator, during Solana’s bull run last summer. Saint and others questioned the anonymity of the developer, “Surya Khosla,” and the safety of users’ funds.
It was later revealed that the developer was Ian Macalinao, the chief architect of Saber and that he had created a web of interlocking DeFi protocols that projected billions of dollars of double-counted value onto the Saber ecosystem, temporarily inflating the total value locked (TVL) on Solana.
Ian admitted in a never-published blog post that he devised a scheme to maximize Solana’s TVL by building protocols that stacked on top of each other, allowing for a dollar to be counted several times. This came to light after one of his secretly built protocols, Cashio, lost $52 million in a hack.
According to the latest report, Ian wrote in a never-published blog post:
The metric to optimize for in Summer 2021 was [total value locked (TVL)].TVL can only count if protocols are built separately, so I devised a scheme to maximize Solana’s TVL: I would build protocols that stack on top of each other, such that a dollar could be counted several times.
The investigation by DOJ is focusing on the various crypto projects connected to Saber, as per the report. It includes the decentralized-finance (DeFi) yield-farming app Sunny Aggregator and Cashio, which experienced a significant loss of funds in a hack that took place in March.
Ian used fake identities to write the code for both projects in secrecy:
If an ecosystem is all built by a few people, it does not look as authentic. I wanted to make it look like a lot of people were building on our protocol rather than ship 20+ disjoint [sic] programs as one person.
The revelation of the Macalinao brothers’ manipulation of their projects’ Total Value Locked (TVL) metric has led industry statistics service DefiLlama to alter its presentation of this popular metric.
In response to the report, the brothers abandoned their plans to migrate Saber to the Aptos blockchain, stepped down from their crypto venture-capital firm Protagonist VC, and transferred control of some of their pseudonymously-built projects to Marinade, another Solana DeFi protocol.
The report claimed that Ian has been working to keep Saber’s infrastructure running, but the project’s Discord server is mostly inactive. Additionally, Sunny and Cashio, two projects whose tokens have not been performing well, are practically inactive.
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