4.4 million dollars spent for 4.42 trillion BONK withdrawal! What does Ripple’s Schwartz warn about?

How the BonkDAO withdrawal unfolded

The incident began with the BIP #76 proposal presented via the Realms platform. The proposal aimed to transfer 4.42 trillion BONK tokens from the BonkDAO treasury to an external address. It was highlighted that smart contracts remained intact, there was no classic network attack, and the platform’s token-weighted voting system was used as intended.

Reports indicate the executing wallet acquired approximately 1% of BONK’s total supply, spending about $4.4 million through Binance and Bybit. These tokens were deposited less than 25 hours before the vote closed, allowing this single wallet to control 99.9% of the voting power. With this dominance, the proposal passed, resulting in the transfer of tokens representing about 5% of BONK’s total circulating supply to the designated address.

Mini Glossary: Realms is a governance infrastructure used within the Solana ecosystem. Token holders can submit proposals and vote through this system, with voting power typically determined by the number of tokens held or locked.

Another striking aspect was the low turnout. Out of 18,500 eligible wallets, only seven participated in the vote. This limited engagement enabled the sole large holder to single-handedly determine the outcome, raising questions about the effectiveness of current governance models.

Why Schwartz sees legal risks in the transaction

David Schwartz pushed back against the “code is law” philosophy often embraced by decentralization advocates. He explained that, when communal assets are redirected, state courts evaluate not just the transaction’s validity on-chain, but also the economic harm and the responsibility of involved participants.

Schwartz asserted that simply complying with smart contract rules does not make a transaction legitimate and warned that transferring shared treasury funds in this manner could be considered corporate fraud.

He further explained that a DAO, especially when not registered as a legal entity like an LLC, might be treated under common law as a general partnership. In such cases, participants supporting the proposal could be seen as violating their fiduciary duty towards other token holders. Having spent years at the helm of Ripple’s technology, Schwartz is also closely watched for his legal interpretations in the crypto sphere.

Schwartz noted that courts focus on the damages caused, not on whether the asset is a meme coin, and clarified that the law makes no special exceptions for such digital assets.

Investigation and asset tracing underway

BonkDAO representatives confirmed that law enforcement agencies were formally notified about the incident. The project team, along with the Solana Foundation and several centralized exchanges, is currently analyzing on-chain data to trace and possibly recover the withdrawn assets.

Legal circles suggest that this event might become a turning point in the ongoing debate about responsibility in decentralized finance. They note that, in this context, blockchains serve not as a shield for wrongdoers but as a transparent ledger that exposes all activity to scrutiny.