Recovery of Misappropriated Funds from Converter Contract Exploit and Allocation to Terra Classic Community Pool with 15% Finder’s Fee

General
1

Revised Proposal: Recovery of webETH from Converter Contract

Summary

This text proposal signals community support for the decentralized recovery of approximately 1,785.93 webETH (valued at ~$6.68 million at the time of transfer) that was illegitimately extracted from the Terra Classic converter contract.

Upon successful recovery, 100% of the recovered assets will be deposited directly into the Terra Classic Community Pool. The discoverers, “$KNEEL Team 6,” will subsequently submit a separate Spend Proposal to receive their 15% finder’s fee. This recovery process will incur no legal expenses for the Community Pool. Should litigation be deemed necessary, a separate governance proposal will be submitted for community approval.

Motivation

The unauthorized extraction of these funds represents a significant loss to the Terra Classic ecosystem. Recovering this value is critical for funding essential activities like core development, security audits, and community-driven initiatives. The proposed structure ensures:

Community Control: All recovered funds are secured in the Community Pool immediately.

Incentivization: The 15% finder’s fee rewards decentralized security efforts.

No Financial Burden: The Community Pool is shielded from all recovery costs, legal or otherwise, during the initial discovery and execution phase.

Proposal Details

Background on the Exploit

A vulnerability was exploited through a malicious migration handler on July 2, 2025, which led to the transfer of 1,785.93 webETH from the converter contract to an external address. The funds were subsequently bridged via Wormhole and currently reside on the Ethereum mainnet at address 0x6b671b51258db0316dd89bc0075d6113488be5e8. This extraction was unauthorized and deviated from the contract’s intended function.

Proposed Action

Recovery Lead: Discoverer “$KNEEL Team 6” will lead the decentralized recovery efforts.

No Cost Guarantee: The discoverer will cover all costs associated with discovery, forensics, and technical execution. The Community Pool will bear ZERO legal or forensic expenses for this effort.

Deposit First: Upon successful recovery and return, 100% of the webETH will be deposited directly into the Terra Classic Community Pool.

Finder’s Fee (Post-Deposit): After confirmation of the deposit, the discoverer (wallet: terra1fnyfl8dmyudmn8qlcwmfwj3dfw9akh9gye287z) will submit a separate Spend Proposal for the 15% finder’s fee.

Litigation Approval: This proposal does not authorize any legal action or spending of Community Pool funds on legal expenses. If the recovery team determines that litigation is a viable path, they must submit a separate governance proposal detailing the scope, cost, and rationale for community approval before proceeding.

Transparency: The oversight coordinator (proposer) will monitor the process and ensure monthly progress updates are posted publicly.

Risks

Recovery Uncertainty: Success is not guaranteed, as funds are on a separate blockchain.

Time and Volatility: Recovery may take 6-12 months, during which the asset value may fluctuate.

Timeline

Proposal Passage: Immediate signaling upon vote approval.

Recovery Initiation: Within 30 days of passage.

Progress Updates: Monthly reports until resolution.

Completion Target: Within 6-12 months.

Conclusion

Voting YES supports initiating the recovery of $6.68 million in assets under a financially responsible structure that safeguards the Community Pool and rewards decentralized security efforts.

1 Like
3

Anyone has the right to fill out a form to have a case investigated. The only requirement is that the alleged theft exceeds a certain amount of dollars. SECGOV has to review the form and the document you can attach. Since the funds were decentralized, and if you want them to be returned, they must be requested through a decentralized process (community multisig), but this only if you want the funds to be recovered. If you want the person who extracted the funds to be prosecuted, that doesn’t have to go through governance. Filling out the form is something anyone can do. This doesn’t imply anything; you can make a mistake and there’s no problem. You simply ask for it to be reviewed. The fact that information was scarce is due to several reasons, but only one proposal was created, and we could have created five individual ones or one that was too long. It’s more complex to assimilate, especially for those who are not used to reading text. If the community doesn’t want attempts to recover the funds, then they can vote no. We will accept the decision. If you want to file a complaint, we can do so on our own. The proposals under discussion can be modified; perhaps we need to know what the community wants and the information hasn’t been sufficient.

1 Like
4

Does being an admin give you rights over the funds? No, being an “admin” in Anchor Protocol does not grant direct rights or control over user funds. Anchor is a decentralized, non-custodial protocol, meaning users retain full control of their assets at all times.

Governance via ANC: The ANC token is the governance token. By staking ANC, holders gain voting power to propose and approve changes to the protocol.

By grok.

1 Like
5

Here’s Prop 29, which stated that anchor functions would be disabled, but admin rights were never relinquished. https://x.com/anchor_protocol/status/1534377834063486977?t=8vcP9grCbCWYvIL82woNew&s=19

6

The funds actually appear to be located in the address 0xd4bFbDBe591f28bEBEC03A21C8a70afd08b35E5F and were sent there from 0x6b671B51258dB0316Dd89BC0075D6113488Be5E8 on July 2, 2025.

1 Like
7

that wallet is mentioned in the SEC trial as TFL wallet. u sure “lunc community” has any claim to it? lol

who’s to say it wasn’t TFL moving the funds to bankruptcy estate, for example?

image
image963×488 9.65 KB

1 Like
8

That Ethereum wallet address is the one associated with the Terra wallet. Up until four months ago, it had no funds, and the event that caused the theft was the closure of the Wormhole Bridge. If it hadn’t been for the gradual theft, we can create up to five proposals in total, and this is just one. In the next one, if it’s approved and investors want to continue, you’ll all see what’s been happening and how funds have been stolen.

1 Like
9

the next prop would be ust goes interchain,450 million dollars prop and lido stake tokens.

1 Like
10

Everything is super controlled. I’ve tracked many wallets on seven different blockchains and smart contracts. We have the CEX deposits and withdrawals. Although it’s clear that the FBI and Interpol have incredibly better tools, we can always reach everything because at some point, transfers have to be made, at least to pay for gas.

11

Any funds moved from those wallets would be at the direction of the bankruptcy trustee, or performed by them.

1 Like
12

The logical conclusion, barring evidence to the contrary, is that this movement of these funds is part of the TFL bankruptcy liquidation activities. If there is a belief of impropriety then the first course of action would be to refer the issue to the bankruptcy trustee, and let them deal with it.

1 Like
13

These funds were mainly from those deposited by Beth to borrow USTC.

1 Like
14

They were sent four months ago, and TFL was prohibited from operating, let alone draining, a decentralized protocol. The funds were supposedly in a trust, but that’s not the case.

1 Like
15

If you don’t like it, vote no, but if you follow the timeline, you’ll see what I’m talking about. It would be a welcome relief to recover those funds, but if the governing body decides against it, it will be accepted. It’s simply a review of a drain on funds. It’s a right we investors have, and you can make a mistake; it’s fine. But in this case, it’s clear.

1 Like
16

Let’s go after that money!!! :flexed_biceps:

5 Likes
17

They still have 12 billion lunc (rewards dispatcher) and roughly 100 million ustc that they’ll empty and sell any day now. They need to give up their admin rights now.

18

If they sell those 12 billion lunc and 100 million ustc,buah!! that would be very bad!

19

You should really speak to a paid legal team about what you are doing here.

The wallet is mentioned in the bankruptcy estate and will most likely conflict with the estate’s rights making the recovery and distribution outside the proper legal structure.

You should try and get formal approval by the bankruptcy court or trustee.

I would advise you to do the above before doing something that may be illegal and has the possibility affect all holders negatively.

It is possible anyone who tries to move, claim, or distribute those assets outside the court process could face legal consequences…

2 Likes
20

I just spoke to Evan and honestly it looks bad…the funds are still in danger and someone who knows they’ve been caught and is doing nothing to return the funds…

21

This will be the second time I fill out a form for the SEC. Don’t worry. I assume my knowledge is superior to yours. You’re obviously speaking without knowledge.