Solana lender MarginFi saw outflow of $250M: Dispute between community & lending protocols

On Apr 12, 2024

Solana network-based Defi protocols MarginFi, Solend, & SolBlaze jumped into a dispute against each other.

Solana is a popular Proof-of-Stake (PoS) crypto network which is known for its highly scalable transactions at very low fees. Over the last couple of weeks, the Solana network was on the top Crypto news headlines because of the network congestion issues. Reportedly high bot activities on the network impacted the network’s performance.

On 11 April 2024, Solana network-based lending protocol SolBlaze alleged that MarginFi had not restocked BLZE tokens in their rewards system for users to claim for the last three weeks.

Additionally, the lending platform suggested that the MarginFi team had ignored their attempts to communicate and address the issue.

MacBrennan, the co-founder of the MRGN group, tried to clarify the issue & misinformation on this matter and said that the main reason for miscommunication was network congestion issues.

We were the target of a very unfortunate hit piece today.

I'll clarify the misinformation you're seeing:

1) This tweet is completely wrong

marginfi has failed to replenish BLZE over the last 3 days, not three weeks. Yes, this is because of chain congestion and prioritizing… pic.twitter.com/c8OhZqBYza
— macbrennan (hiring) ◼️ (@mrgnalt) April 10, 2024

Many MarginFi users criticized the protocol for not being truthful with the backend operations.

I like marginfi I like Blaze.

As someone who has Blaze in MarginFi I can with 100% confidence say the rewards stopped weeks ago not days.
— LaceDefi (@HODLonBRO) April 10, 2024

Following this controversy, Solana-based another protocol Solend asked the MarginFi users to withdraw funds from MarginFi and deposit them into their protocol, to get airdrop reward.

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Solend will airdrop to users who withdraw from marginfi and deposit into Solend.
— Solend (@solendprotocol) April 10, 2024

Rooter, Solend founder, explained why they joined this dispute and confirmed that his project was attacked by the MarginFi team during the bear phase of the market. He said that healthy competition is really a good thing but such types of misbehaving shouldn’t be contented easily.

some of you may have seen the drama with marginfi, but don't know the backstory of solend vs marginfi.

let me catch you up…

starting during the bear market, we were on the receiving end of multiple attacks. there's no shortage of examples, so I'll highlight just a few.
— Rooter (@0xrooter) April 11, 2024

Following all this drama, Edgar Pavlovsky, the CEO & founder of MarginFi, stepped down from all the roles of the project & backend company.

He said that the engaged team in the project is world-class but things are not going well internally & externally. Indirectly he dragged fingers toward the backend firm.

I resigned from mrgn today. From working on marginfi, from the research arm, from it all.

It's a world class team — it really is — but I don't agree with the way things have been done internally or externally. I've said it many times and I'll say it again, but those of us who…
— edgar ◼️ (@edgarpavlovsky) April 10, 2024

Amid the drama, more people are joining the Solend Protocol. This platform gained four times as many new users in the last day, jumping from 245 on Wednesday to 1178 today.

Simultaneously the total value locked (TVL) in the MarginFi protocol dropped from $910 million to $660 million.