The non-profit behind the Sui Network has ended its partnership with decentralized exchange MoveEX following a violation of their lockup agreement, according to an announcement from the Sui Foundation.
MoveEX allegedly transferred some Sui tokens (SUI) that were subject to a vesting schedule without notifying or getting consent from the Sui Foundation. This sparked accusations on social media that Sui had misrepresented its token emissions and was dumping rewards on exchanges.
Contract Breach Led to Public Backlash
As part of MoveEX’s early contributions to Sui during the mainnet launch in May, the DEX builder received 2.5 million SUI tokens, approximately 5.15% of the total supply. These tokens were subject to a lockup schedule aligned with Sui’s release of tokens over time to maintain stability.
In June, pseudonymous Twitter user DefiSquared ↗ accused Sui of dumping staked rewards that were supposed to be locked up and non-circulating. DefiSquared noticed large transfers of SUI being moved to Binance and claimed this contradicted Sui’s stated emission schedule.
After investigating, the Sui Foundation discovered that MoveEX had executed the transactions that led to the accusations, without informing Sui or asking for approval. Out of the 2.5 million SUI allotted to them, MoveEX had split and sent 650,000 SUI each to three different wallets. The remaining SUI were left in the original wallet.
Partnership Dissolved Due to Contract Breach
Because MoveEX violated the vesting schedule lockup and failed to communicate these transactions with Sui, the foundation has terminated its partnership with the DEX platform. Earlier this month, Sui asked MoveEX to send the full 2.5 million SUI to a qualified third-party custodian, who will release the tokens according to the original schedule.
In response to Sui’s announcement, MoveEX said ↗ on Twitter that they distributed the SUI only to custodial and non-custodial wallets under their control. They expressed appreciation for their collaboration with Sui and the support from the community.
The Sui Foundation reassured that all other locked up tokens are being held by custodians who have agreed to enforce the vesting terms. They said this situation “underscores the importance of custody and administration solutions that are capable of programmatically enforcing lockup terms without susceptibility to human override.”
Implications for Sui’s Reputation and Future
This incident presents a blow to the public perception and trust in Sui, which only launched its mainnet a couple months ago. Theaccuracy of Sui’s reported circulating supply and emission schedule is being called into question.
However, the issue appears to stem from MoveEX allegedly breaching its contractual obligations, rather than intentional deception by Sui. As long as no other partners violate their vesting terms, Sui may be able to recover from this setback if it can prove the transparency of its release schedule going forward.
The dissolution with MoveEX also means Sui will need to find another partner to build out and maintain DeepBook, the on-chain order book that MoveEX was developing. This could set back the progress and adoption of Sui if not handled smoothly.
Overall, this situation highlights the challenges decentralized platforms face when collaborating with third-parties. Relying on partners to self-custody and drip-release tokens based on verbal agreements leaves room for error at best and malicious behavior at worst. More rigorous custodial and technical solutions could help mitigate this risk for Sui and other networks building out their ecosystems in the future.