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About $90.1 million has mistakenly gone out to users of popular DeFi staking protocol Compound after an upgrade gone epically wrong. Now, the founder is making a plea — and issuing a few threats — to incentivize the voluntary return of the platform’s crypto tokens.

“If you received a large, incorrect amount of COMP from the Compound protocol error: Please return it,” Robert Leshner, founder of Compound Labs, tweeted late Thursday.

“Keep 10% as a white-hat. Otherwise, it’s being reported as income to the IRS, and most of you are doxxed,” continued the tweet.

The price of Compound’s native token, COMP, initially plunged nearly 13% in a day on news of the bug, but it’s since gained back ground.

Whether reward recipients choose to return many millions of dollars to the platform remains to be seen, though if history is any indication, it is certainly possible.

“Alchemix [another decentralized finance, or DeFi, protocol] had a similar incident a few months back where they gave out more rewards than intended,” blockchain security researcher Mudit Gupta told CNBC. “Almost everyone who got the extra rewards refunded the extra.”

What is different here is that the Alchemix exchange lost just $4.8 million.

But Gupta remains hopeful.

“This makes me optimistic that people will refund most of COMP tokens, as well, but you can never be sure,” he said.

What went wrong

DeFi protocols like Compound are designed to recreate traditional financial systems such as banks and exchanges using blockchains enriched with self-executing smart contracts.

On Wednesday, Compound rolled out what should have been a pretty standard upgrade. But soon after implementation, it was clear that something had gone seriously wrong.

“The new Comptroller contract contains a bug, causing some users to receive far too much COMP,” explained Leshner in a tweet.

“There are no admin controls or community tools to disable the COMP distribution; any changes to the protocol require a 7-day governance process to make their way into production,” he added, indicating that no fix could take effect for seven days.

Gupta, a core developer at decentralized crypto exchange SushiSwap, said in a tweet that the entire episode could be blamed on a “one-letter bug” in the code.

Compound made clear that no supplied or borrowed funds were at risk, but that did little to soften the blow.

Protocol users en masse began reporting massive windfalls. Soon after Leshner’s tweet about the bug, $29 million worth of COMP tokens were claimed in one transaction. Another claimed that they received 70 million COMP tokens into their account, or about $20.8 million at the time of their post.

The list of COMP token millionaires goes on.

For users accustomed to providing their crypto to borrowers at a set interest rate, which is typically a single-digit APY, the erroneous and sizable rewards were certainly a nice change in pace.

Leshner made clear, however, that there is a cap to the carnage. The Compound chief tweeted that the Comptroller contract address “contains a limited quantity of COMP.”

“The impact is bounded, at worst, 280,000 COMP tokens,” Leshner wrote. Gupta told CNBC that this entire pool of tokens — worth about $90.1 million, as of the time of publication — has already been handed out.

Threats lack teeth

Newly-minted COMP token millionaires now have a few options.

Bitcoin developer Ben Carman points out that it isn’t really possible for the platform to reclaim the money.

“They shouldn’t be able to recall the money without rolling back the chain,” explained Carman. “They’d have to purposefully 51% attack the chain to get rid of some blocks.”

So, it is up to a user’s discretion to decide next steps.

As a hypothetical, let’s take the account holder who was accidentally gifted $29 million in COMP tokens in error. This user could return the funds and hold onto the $2.9 million “white-hat” tip. But there is also nothing to keep them from holding their mistaken reward and risk being “doxxed.”

Doxxing someone means making public what is considered private information about an individual, which in the cryptosphere, is tantamount to committing a cardinal sin.

Doxxing their customers is about the worst thing a crypto company can do from a PR perspective,” Mati Greenspan, portfolio manager and Quantum Economics founder, told CNBC.

And it seems unlikely Leshner would pursue that route. He was quick to walk back his Thursday evening tweet, saying that, it “was a bone-headed tweet/approach.”

And then there’s the threat related to the mistaken reward being reported to the IRS.

Section 61 of the IRS code defines income very broadly. If you received a large sum from this error and decide to keep it, that would be considered income,” explained Shehan Chandrasekera, a CPA and head of tax strategy at crypto tax software company CoinTracker.io.

Users who were mistakenly awarded extra tokens could voluntarily return the funds. In that scenario, Chandrasekera says that “technically the recipient is supposed to pay income tax based on the market value of the coins at the time of receipt, but if he or she returns the funds, there’s no reason to report the income.”

But Chandrasekera also makes clear that no one has to return the funds. If their reward is reported to the IRS, they would simply be subject to income taxes on that amount.

So that $29 million COMP token winner stands to take the most home in a scenario where they just pay up to Uncle Sam, rather than pay it back to Compound.

But as Greenspan points out, how things play out with this bug is almost entirely beside the point. “The bigger issue is – can it happen again?” he said.

Compound is the world’s fifth-largest DeFi protocol with a total value locked of $9.65 billion, according to DeFi Llama, which provides ranking and metrics for DeFi protocols.

“The protocol can easily absorb a loss of $90 million and a lot of it will likely be returned, but the larger issue would be if people lose confidence in the system’s ability to function properly,” said Greenspan.

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Nintendo profit plunges 69% as it cuts forecast for sales of ageing Switch console

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Nintendo profit plunges 69% as it cuts forecast for sales of ageing Switch console

Mario poses at the “SUPER NINTENDO WORLD” welcome celebration at Universal Studios Hollywood on February 16, 2023 in Universal City, California.

Rodin Eckenroth | Getty Images Entertainment | Getty Images

Nintendo on Tuesday cut forecast for Switch sales for its fiscal year ending March 2025 as demand wanes for its ageing console.

The Japanese gaming giant said it now expects to sell 12.5 million units of the Switch over the course of the period. That’s down from a previous forecast of 13.5 million units.

Nintendo has been contending with fading demand for its flagship Switch console, which is now more than seven years old.

Investors are waiting for news surrounding a successor to the Switch, which they hope will re-energize Nintendo’s gaming business. In the past, the company said that the Switch successor will be announced in its current fiscal year, which ends in March 2025.

Nintendo also cut full fiscal year forecasts for sales and operating profit. The company said it now expects sales of 1.28 trillion yen versus a previous forecast of 1.35 trillion yen. The operating profit outlook for the period was slashed from 400 billion yen to 360 billion yen.

Here’s how Nintendo did in its fiscal second quarter ended Sept. 30 versus LSEG estimates:

  • Revenue: 276.7 billion Japanese yen ($1.8 billion), compared with 273.34 billion yen expected.
  • Net profit: 27.7 billion yen, versus 48.06 billion yen expected.

Revenue fell 17% year-on-year. Net profit plunged just over 69% versus the same period last year.

Super Mario, Zelda boost fading

The Switch is Nintendo’s second best-selling console in history, behind the Nintendo DS. Despite the recent fall in sales, Nintendo has prolonged the console’s appeal for an extended period of time since its launch in 2017 by relying on its recognizable characters.

In its last fiscal year, Nintendo managed to reinvigorate sales of the Switch thanks to the the success of the “Super Mario Bros. Movie” and the highly anticipated release of the “The Legend of Zelda: Tears of the Kingdom” game, which underscored the appeal of its iconic characters.

But that effect is fading.

On Tuesday, Nintendo noted the boost that the company received in the first half of its last fiscal year, but said “there were no such special factors in the first half of this fiscal year, and with Nintendo Switch now in its eighth year since launch, unit sales of both hardware and software decreased significantly year-on-year.”

Sales of the Switch totaled 4.72 units in the six months ended Sept. 30, compared with 6.84 million units in the same period of last year.

In the face of falling sales, Nintendo has tried to license out its intellectual property for use everywhere, from movies to theme parks. A new Super Mario movie is slated for release in 2026.

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Meta extends ban on new political ads past Election Day

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Meta extends ban on new political ads past Election Day

Meta’s Mark Zuckerberg plans to visit South Korea, scheduling key meetings during the trip, according to a statement by Meta on Wednesday, which did not provide further details. Reportedly, Zuckerberg is anticipated to meet with Samsung Electronics chairman Jay Y. Lee later this month to discuss AI chip supply and other generative AI issues, as per the South Korean newspaper Seoul Economic Daily, citing unnamed sources familiar with the matter.

Alex Wong | Getty Images News | Getty Images

Meta extended its ban on new political ads on Facebook and Instagram past Election Day in the U.S.

The social media giant announced the political ads policy update on Monday, extending its ban on new political ads past Tuesday, the original end date for the restriction period.

Meta did not specify the day it will lift the restriction, saying only that the ad blocking will continue “until later this week.” The company did not say why it extended the political advertising restriction period.

The company announced in August that any political ads that ran at least once before Oct. 29 would still be allowed to run on Meta’s services in the final week before Election Day. Other political ads will not be allowed to run.

Organization with eligible ads will have “limited editing capabilities” while the restriction is still in place, Meta said. Those advertisers will be allowed to make scheduling, budgeting and bidding-related changes to their political ads, Meta said.

Meta enacted the same policy in 2020. The company said the policy is in place because “we recognize there may not be enough time to contest new claims made in ads.”

Google-parent Alphabet announced a similar ad policy update last month, saying it would pause ads relating to U.S. elections from running in the U.S. after the last polls close on Tuesday. Alphabet said it would notify advertisers when it lifts the pause.

Nearly $1 billion has been spent on political ads over the last week, with the bulk of the money spent on down-ballot races throughout the U.S., according to data from advertising analytics firm AdImpact.

Watch: Tech still investing big in AI development despite few breakout products.

Tech still investing big in AI development despite few breakout products

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Jeff Bezos and OpenAI invest in robot startup Physical Intelligence at $2.4 billion valuation

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Jeff Bezos and OpenAI invest in robot startup Physical Intelligence at .4 billion valuation

Sam Altman, CEO of OpenAI, attends the 54th annual meeting of the World Economic Forum, in Davos, Switzerland, January 18, 2024 (L), and Amazon CEO Jeff Bezos speaks during the UN Climate Change Conference (COP26) in Glasgow, Scotland, Britain, November 2, 2021.

Reuters

Physical Intelligence, a robot startup based in San Francisco, has raised $400 million at a $2.4 billion post-money valuation, the company confirmed Monday to CNBC.

Investors included Amazon founder Jeff Bezos, OpenAI, Thrive Capital and Lux Capital, a Physical Intelligence spokesperson said. Khosla Ventures and Sequoia Capital are also listed as investors on the company’s website.

Physical Intelligence’s new valuation is about six times that of its March seed round, which reportedly came in at $70 million with a $400 million valuation. Its current roster of employees includes alumni of Tesla, Google DeepMind and X.

The startup focuses on “bringing general-purpose AI into the physical world,” per its website, and it aims to do this by developing large-scale artificial intelligence models and algorithms to power robots. The startup spent the past eight months developing a “general-purpose” AI model for robots, the company wrote in a blog post. Physical Intelligence hopes that model will be the first step toward its ultimate goal of developing artificial general intelligence. AGI is a term used to describe AI technology that equals or surpasses human intellect on a wide range of tasks.

The news comes days after OpenAI launched a search feature within ChatGPT, its viral chatbot, that positions the AI startup to better compete with search engines like GoogleMicrosoft‘s Bing and Perplexity. Last month, OpenAI also closed its latest funding round at a valuation of $157 billion.

Physical Intelligence’s vision is that one day users can “simply ask robots to perform any task they want, just like they can ask large language models (LLMs) and chatbot assistants,” the startup wrote in the blog post. In case studies, Physical Intelligence details how its tech could allow a robot to do laundry, bus tables or assemble a box.

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