[GIP-275] Return of Liquidation Profits & Fees for Expired Credit Managers

Summary

This proposal aims to reimburse affected users for profits and fees generated during the forced liquidation of expired Credit Managers on Arbitrum, Optimism, Sonic, and Ethereum Mainnet, and to establish a streamlined process for future events.

Specifically, this proposal entails:

1. Transferring 100% of the profits currently held by the DAO Old Liquidator wallet directly to the affected user wallets.
2. Reimbursing the portion of liquidation fees collected by the DAO Treasury.
3. Formally requesting kpk (curator) to reimburse their portion of the fees collected during these events.
4. Establishing a Standing Mandate to automatically refund profits for future emergency liquidations occurring in Chaos Labs Legacy Markets during market pauses.

Motivation

Recently, specific Credit Managers were set to expire. Following the expiration, the accounts were paused, and liquidations were subsequently whitelisted to close out positions.

These liquidations occurred on paused accounts that were effectively forced into liquidation due to the expiration status, rather than user negligence regarding health factors. Consequently, it is ethically inconsistent to profit from users in this specific scenario.

Given that these accounts were forcefully liquidated as part of an emergency or migration process, it's proposed to return all earnings (Liquidator profits and Protocol fees) to the affected users. This action reinforces commitment to fairness and user protection during protocol interventions.

Specification

The reimbursement process covers three distinct components: the immediate restitution for past events and a forward-looking rule for future operations.

1. Liquidator Profits (Current Event)

The Emergency Liquidator wallet collected arbitrage profits from these transactions. The total accrued profits from these specific liquidations will be sent directly to the wallets of the affected users as detailed in the tables below.

2. DAO Treasury Fees & kpk Reimbursement (Current Event)

The DAO Treasury collected a fee share from these liquidations. The DAO will reimburse this amount. Additionally, the DAO requests kpk to mirror this action for their respective fee share.

3. Standing Mandate for Future Legacy Liquidations

To eliminate the need for repetitive governance votes regarding standard emergency maneuvers in the Chaos Labs Legacy Markets, this proposal establishes a permanent mandate.

The Standing Rule: The DAO grants pre-authorization for the Liquidator or Treasury to automatically refund liquidation profits to affected users in any future event that meets all the following criteria:

1. The Trigger: A liquidation occurs in the Chaos Labs Market.
2. The Condition: The liquidation occurs while the market is technically Paused, meaning the user had no ability to manage their position.
3. The Actor: The liquidation is performed by a Whitelisted Emergency Liquidator.

Operational Execution: In such instances, the liquidation profit (excess collateral seized) is classified as user property rather than protocol revenue. It will be sent directly to the user's wallet as an operational maintenance action, requiring no further Snapshot or on-chain governance vote.

Distribution Data

Arbitrum Reimbursements

Borrower Wallet	Credit Account	Liquidation Transaction	Token	Liquidator Profit Refund
0x96c5...c46e	0xA350...bEB2	0x6fe2...9120	WETH	0.0240
0x92e9...E0F2	0x5C33...DbD9	0xbe2f...9062	USDC	53.5316
0x36C9...3E71	0x1Bf2...7508	0x6474...1e14	USDC	1168.5501
0x105c...42B7	0xcC37...c4aA	0xf290...b422	WETH	0.0046
0x0A99...8998	0x4F83...911E	0xfd62...9e74	USDC	16.5619
0xE118...6072	0xA350...bEB2	0x6fe2...9120	WETH	0.0240
0xe1fD...FB70e	0xeDAe...4803	0xadf0...3845	WETH	0.0029
0x7A83...EA45	0xa98C...C009	0xb85b...9fe7	USDC	12.8140
0x7685...5DE7	0x22D2...64Ce	0xa260...ae62	WETH	0.0030
0x445C...5e8e	0x0a88...2Dc6	0x3615...6f92	WETH	0.0126

Optimism Reimbursements

Borrower Wallet	Credit Account	Liquidation Transaction	Token	Liquidator Profit Refund
0x4d86...0a84	0x321c...D91a	0x63fd...b172	WETH	0.0051

Sonic Reimbursements

Borrower Wallet	Credit Account	Liquidation Transaction	Token	Liquidator Profit Refund
0x531b...8689	0x9225...d4ce	0x85c3...96d6	WS	17.3410

Ethereum Mainnet Reimbursements

Curator + DAO liquidation fee is split between kpk and DAO treasury 50/50. So this proposal asks DAO permission to send 50% of the specified fee, while another 50% should be sourced from kpk side.

Borrower Wallet	Credit Account	Liquidation Transaction	Token	Liquidator Profit Refund	Curator + DAO liquidation fee
0x6D7A...688f	0xF236...dff9	0x73b8...ae70	wstETH	5.2670	2.6340
0xE442...D6c	0x5cab...5731	0xe2ec...62ac	wstETH	2.7630	0.9210

Execution

Upon reaching the "For" quorum, the following actions will be queued:

1. Transfer: Execute batch transfers from the Liquidator Wallet to the addresses listed in the specification.
2. Transfer: Execute batch transfers from the DAO Treasury to the addresses listed in the specification.
3. Communication: The DAO contributors will coordinate with kpk to facilitate the return of their portion of the fees.