Distribution plan for Recovered Funds from Arbitrum GLP

Summary

We would like to thank the community and delegates for their input into the Resolve the Distribution Plan for the Recovered Funds from Arbitrum GLP discussion.

This proposal outlines the next steps for distributing funds to the GLP holders affected by the disclosed vulnerability in the Arbitrum GMX V1 deployment. As you are likely aware, the funds were returned to the DAO following outreach from GMX, and are now in the Security Committee multi-sig.

Based on feedback from the community and delegates, we find the community largely in favour of a contribution from the DAO and a quick resolution. However, opinions are divided between distribution in stablecoins or GLV tokens. Based on these preferences, (i) $2.0m will be transferred from the fee wallet to the security multisig as the DAO contribution (ii) proposals have been shortlisted for voting by the DAO on distribution.

This proposal is based on community feedback and aims to ensure that users materially recover the value of their funds in GLP prior to the security incident, through distribution of recovered funds, redemption of their residual GLP and a contribution from the DAO.

Distribution Options

The two leading proposals have been fleshed out below: GLV Distribution Stablecoin Distribution

1. GLV Distribution + 500k incentives

• This method ensures that long-term GLP holders retain similar economic exposure to their original positions, allowing them to continue earning while preserving that exposure including throughout any potentially extended or delayed claim period.
• In addition to distributing the recovered amount, the DAO will allocate $2.0m from the treasury as a contribution to impacted GLP users to assist in covering the shortfall from the security incident.
• The distribution will be split equally between the two Arbitrum GLV vaults, giving the users approximately 25% WBTC, 25% ETH, and 50% stablecoins — closely mirroring the GLP composition.
• Additionally the DAO will purchase $500k worth of GLV, to be distributed to users impacted by the incident who claim and retain their received GLV over that three month period. This distribution is a thank you for their continued support of the DAO. Operational details including snapshots for this distribution will be determined by contributors in consultation with the security committee.

Note: GLVs claimed can still be redeemed immediately, without lockup or vesting; however, users who redeem the GLV within the 3 months will not receive a share of the additional $500k distribution.

2. Stablecoin Distribution

• The majority of the recovered funds are already held in stablecoins, which simplifies accounting, as the mapped value will remain consistent over time regardless of changes in the underlying assets.
• In addition to distributing the recovered amount, the DAO will allocate $2.0m from the treasury as a contribution to impacted GLP users to assist in covering the shortfall from the security incident.
• In the course of the community discussion, some members recommended that the distribution be made in stablecoins to minimise complexity. If the DAO votes to distribute users in stablecoins, the funds will be distributed wholly or primarily in USDT.

Next Steps We propose moving these proposals to a Snapshot vote, with the two community discussed distribution options: Option 1: Distribution in GLV, with $2.0 million contribution from the treasury plus an additional $500K GLV tokens provided to users who retain their GLV for a minimum of 3 months.

Option 2: Distribution in the stablecoins, with a $2.0 million contribution from the treasury. Note: The expected timeline for distribution, development effort and resources required for both distribution methods would remain the same under each proposal. Users will additionally still need to claim their residual funds from GLP directly, the value of assets there may continue to change over time and do not affect the distribution amounts.

Once the community reaches a consensus on the distribution method through the Snapshot vote, we will proceed with the distribution plan as follows. Identify Affected Users

Based on the smart contracts events prior to the incident, finalise and publish a list of impacted addresses and corresponding loss amounts.

Distribution Structure

Based on which distribution plan approved, contributors and security multisig will coordinate to convert the funds available including the treasury contribution into the assets determined: GLVs or stables If the DAO votes in favour of the GLV distribution plan, the additional $500k worth of GLV will be purchased for future distribution to those users from the security incident who hold their GLV for the minimum period of 3 months. Claiming from the distribution contract will include signing an on-chain transaction releasing the GMX DAO and affiliates of further claims.

Distribution Timeline

Straightforward, direct claims by affected users will be supported as soon as possible after deployment and an audit of the claims contract. In parallel, the DAO suggests a distribution support window of up to 6 months to accommodate manual claims, particularly for smart contracts (non-Gnosis Safe) and protocol integrations where additional coordination is required For EOA’s (user-controlled accounts), the amount will be in the claim contract for 6 months. Users can still claim after 6 months, but there are no commitments to actively support claims made after this period. For any unclaimed tokens after the 6-month window, the DAO will determine if and how the tokens are returned to the DAO treasury or redistributed via a follow-up proposal.

Conclusion

This proposal is based on community feedback and aims to ensure that users materially recover the value of their funds in GLP prior to the security incident, through redemption of their residual GLP, distribution of recovered funds and a top-up from the DAO. By offering two options, we believe this approach strikes a balance between community interests and protocol alignment.