Justin Sun dumps another $14M of EIGEN after week of controversy

Following a week of drama for EigenLayer’s recently launched token, Justin Sun has deposited 3.62 million EIGEN (worth $14.1 million) to Binance.

Sun had previously claimed 5.24 million airdropped EIGEN (worth $21.5 million at the time), sending it to HTX shortly after the token unlocked for trading on October 1.

A sharp decline in price following both deposits suggests a large volume of EIGEN sales accompanied the moves. After a spike to $4.10 since Sun’s most recent deposit, EIGEN is currently trading around 4.00, according to data from CoinMarketCap.

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While Justin Sun is no stranger to controversy, over the past week, EigenLayer has also found itself the focus of criticism after several gaffes that have damaged the project’s reputation.

EigenLayer purports to extend Ethereum’s ‘trust network’ to other projects by reusing, or ‘restaking,’ already-staked ETH. However, its own operations appear to be run via a system more akin to “trust me bro” rather than taking advantage of Ethereum’s trust-minimizing smart contracts.

‘Unapproved selling’ or phishing scam?

Despite the widespread use of purpose-built vesting contracts for locked tokens, EIGEN had seemingly been distributed to investors under a handshake deal to not sell before an agreed-upon date.

On Friday, EigenLayer took to X (formerly Twitter) to publish a ‘community update’ that it was investigating “unapproved selling activity” associated with a wallet that had received approximately 1.67 million EIGEN.

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Later that day, EigenLayer published another ‘update’ informing users that they had fallen for a phishing email, or, as it put it, “an email thread involving one investor’s transfer of tokens into custody was compromised by a malicious attacker.” Both updates had replies disabled.

As noted by X user DeFi_Made_Here, a test transaction was sent before following up with the full amount (worth almost $6 million at the time). Given the whole amount was indeed sent, it appears that receipt of the test was confirmed via the same, compromised email, rather than via a second line of communication. 

In September, crypto phishing scams netted approximately $46 million, according to ScamSniffer, with a single incident on September 29 accounting for $32 million of the total lost.

Previously, EigenLayer has come under fire for allowing investors to cash out via farming of staking rewards with supposedly locked tokens, and the potential conflicts of interest between EigenLayer advisors and their positions at the Ethereum Foundation.

Sun in the spotlight, as ever

In recent months, Protos examined proof of reserves (PoR) for Sun-linked exchanges HTX, which contained multiple discrepancies in underlying assets, and Poloniex, whose PoR was found to be severely lacking, only accounting for its TRON holdings.

Both exchanges were hacked within two weeks of each other in November last year.

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Given his proximity to the above issues, Sun’s potential involvement in the proposed rearrangements of wrapped Bitcoin has led to concerns over the token’s future credibility, with DeFi lending platform Sky (formerly Maker) recently voting to disable new borrows.

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