As discussed in a previous article on Crypto.IQ, SushiSwap quickly became one of the hottest projects in Decentralized Finance (DeFi) history, with the total value locked skyrocketing to $1.4 billion in just 3 days. Although SushiSwap was almost entirely a copy and paste of popular decentralized exchange (DEX) Uniswap, the reason it became so popular is that it offered liquidity providers much higher rates than regular Uniswap via a native token. This caused almost everyone on Uniswap to put their money into SushiSwap.
However, over this weekend the SushiSwap party came to a crashing halt. From the beginning SushiSwap was founded by an anonymous developer, who goes by the pseudonym Chef Nomi, and Chef Nomi decided to cash out the SushiSwap dev fund all at once.
Chef Nomi converted his vast amount of SUSHI tokens into 37,400 Ethereum (ETH) worth $13 million. This action caused the price of SUSHI to crash from around $5 to just over $1.
Perhaps if Chef Nomi would have sold off the dev fund slowly it wouldn’t have had much of an impact on the market, but for some reason Chef Nomi decided to cash out all at once, which is certainly irresponsible and harmed everyone involved with SushiSwap.
Chef Nomi’s only response to exit scam accusations was that he was within his rights to dump his SUSHI, which may be legally true, but by any standards this is bad project management, and crypto twitter quickly became filled with hate for Chef Nomi.
Zooming out, this is an excellent example of how projects with a centralized supply, such as tokens where a large fraction are held by a developer, are inherently dangerous. There are countless tokens which have centralized supplies, and crypto traders should remember what happened to SushiSwap before investing in such tokens.
Indeed, a primary motivator for creating crypto projects and tokens is to do exactly what Chef Nomi did, which is to cash out and get rich quickly once the token gains some value.
On a final note, SushiSwap has by no means been killed by Chef Nomi, and it still has over $1.2 billion total value locked. In fact, control of SushiSwap has been handed over to the CEO of popular crypto exchange FTX, and SUSHI is rebounding a bit.
That being said, all of the damage caused by Chef Nomi’s SUSHI dump will undoubtedly lead to investors complaining to the Securities and Exchange Commission (SEC), and this incident combined with other recent DeFi failures like YAM increases the likelihood that an SEC crackdown on DeFi is coming soon.