Overview

This is second part of a series detailing the activities of Layer2DAO’s use of 300,000 in OP granted to them by Optimism Governance last year. These post reveal a troubling pattern of now three attempts by Layer2DAO to sell and move Optimism grant funds contrary to their stated intentions, Optimism Governance rules and norms, as well as their misuse after sale.

• Timeline of original sale and bridging of Optimism grant funds here
• Original post establishing L2DAO’s ownership of multisigs here

In part one, I detailed how L2DAO directed 55,000 $OP to two multisigs (ostensibly NFTEarth and LFGROW) under the pretext of ecosystem grants. Onchain evidence and the team’s own statements confirmed that these wallets were in fact actually controlled by the Layer2DAO. Indicating the team granted itself the funds before dumping them to USDC and distributing to individual wallets, violating the no-sale policy.

This post will detail what happened to these funds post-sale and transfer. Research has uncovered a remarkably labyrinthine network of short-term wallets moving the proceeds from grant tokens among them. It’s going to take some time to uncover and detail all of this, as there is simply too much to distill in one post. For now, I will focus on the transactions and flow of funds originating from the purported LFGROW multisig, which is identical in composition to the NFTEarth multisig which and is controlled by L2DAO principals.

Beyond the violation of the no-sale clause, on-chain findings suggest funds were not used according according to the stated purpose of the governance proposal behind this grant, which was to “create a new DAO focused exclusively on educational and tooling solutions for L2 NFT creators, artists and owners.” I can find no evidence of this DAO existing in any form.

Rather, after selling much of the OP for USDC, this multisig directly distributes the entirety of the grant’s value in several thousands of USDC and OP to 20 wallets, many of which are connected to other L2DAO/NFTEarth associated wallets and at least one of which belongs to a known NFTEarth team member, milkywave.

Wallets funded by this multisig engage in activities such as:

• Depositing at least five figures of value directly into a Coinbase deposit wallet used by westonnelson.eth
• Taking unusual action to obfuscate wallets, duplicating actions across several wallets and using contract integrations that make flow tracking more burdensome
• Buying up large amounts of NFTE and then exiting these positions at a profit using Uniswap v3 LP positions in a low-liquidity pool
• Engaging in activities such as pulling liquidity before buying up more NFTE and manipulating price upwards only to re-exit the positions later through liquidity pulling
• Ultimately pull nearly all liquidity out of the token, sending it to close to zero, its current value, mostly after after public evidence of misuse was surfaced
• Participating in the exchanging and wash trading of NFTs on NFTEarth between them, obscuring value exchange and juicing NFTEarth stats highlighted in public comms

Every single transaction on this multisig (and likely that of NFTEarth) is signed by the same two wallet addresses: westonnelson.eth and a second address that evidence suggests is likely also owned by westonnelson.eth.

In short, funds quickly leave the purported LFGROW multisig and are distributed to individual wallets with no observable value generated that aligns with the stated goals of LFGROW grant; rather, value is primarily extracted directly to a Coinbase account used by westonnelson.eth.

LFGROW Multisig: Major Findings