The $160M Dilemma: How Will the Sui Foundation Handle Frozen Hacker Funds?

Author: @tmel0211

Link：https://x.com/tmel0211/status/1926483076516856193?t=7fSEW8yU9myGjL7PlNLONw&s=19

The Sui Foundation has successfully frozen $160 million in stolen funds, temporarily preventing the hacker from causing further damage. However, under growing public scrutiny over “violating decentralization,” all eyes are now on @SuiNetwork: What will the foundation do with the funds? Below are several possible scenarios:

Current constraint: The $160 million is locked via a deny_list. Any transaction involving hacker addresses will be rejected by validators.

To unlock the funds, the following options are possible:

1. Whitelist mechanism (Green Channel): Skip all safety checks using transaction_allow_list_skip_all_checks. Although the relevant GitHub PR has been closed, this appears to be the most likely path.

2. Hard fork: Directly modify the protocol rules and on-chain state — a costly and drastic solution.

3. Permanent freeze: Do nothing, maintain status quo. This would result in an accidental “deflation” of SUI supply.

Possible Unlock Strategies (For Reference Only):

1) Whitelist mechanism + community governance vote:

Initiate an on-chain governance vote: “Should the frozen funds be proportionally returned?” If the vote passes, the Sui Foundation would return funds through transactions that bypass the deny_list using the whitelist mechanism.

This approach offers community backing and makes use of the whitelist’s superpowers. However, given the concentrated distribution of SUI tokens, the vote outcome is likely fully controlled by the foundation — making it more of a “democratic disguise” for centralized operations.

2) Pure whitelist-based return:

The Sui Foundation directly adds the return transactions to the whitelist, bypassing the deny_list and distributing funds to victims per predefined rules.

This would effectively make the foundation a “super-admin,” devastating Sui’s reputation for decentralization.

3) Negotiation with the hacker for proportional return:

Although the hacker’s control has been neutralized via the deny_list, any return would still require the foundation to use the whitelist. Thus, the negotiation holds no real technical value. Using this tactic to mask whitelist-based operations would be akin to “colluding with evil” to cover up the truth.

4) Hard fork to directly modify state:

A new client version is released that rewrites the ownership of frozen assets at the protocol level. Validators would then be expected to upgrade.

This mirrors Ethereum’s response to The DAO hack and could risk a network split, similar to how Ethereum Classic (ETC) was born. Such a move would destroy the chain’s immutability. For a new Layer 1 chain like Sui, this could be a self-destructive gamble — especially in today’s saturated market, unlike Ethereum’s early days in 2016.

5) Whitelist + third-party regulatory custody:

Transfer the frozen funds to a neutral third party using the whitelist, then seek regulatory endorsements from the SEC, CFTC, etc., and resolve the matter via public hearings.

This could position Sui as a “compliance role model” in crypto. While seemingly far-fetched, it’s worth remembering that the Sui team originally came from Facebook’s Libra, which was targeted by regulators. If the foundation handles this centrally again, it could invite renewed scrutiny — so better to preemptively seek regulatory approval.

However, this merely uses compliance to mask the centralized whitelist mechanism and won’t stop the debate.

6) Whitelist + DeFi compensation fund:

The foundation could create a new fund contract. Frozen funds would be transferred via the whitelist to this contract, and future ecosystem revenues would be used to gradually compensate victims via time-locked releases.

This clever strategy transforms victims into stakeholders and critics into supporters, following the principle that only the directly affected should have a say. While it could silence public noise, it’s still a complex economic governance solution with significant implementation uncertainties.

7) Deflation: Maintain status quo and permanent freeze

Abandon any whitelist attempts and take no further action. The frozen assets will remain permanently locked, effectively making the SUI supply deflationary.

8) Time arbitrage strategy:

Leave the issue unresolved for the long term. As market confidence fades and the token price drops, quietly accumulate a large amount of SUI. Then, at the right moment, suddenly announce full compensation and resolve the issue. The prolonged delay can be justified with reasons like technical complexity, governance difficulties, or regulatory compliance. This allows low-cost accumulation of SUI during a period of market despair, followed by a one-time full repayment on top of the deflationary narrative.

Note: These are speculative discussions only. The final decision depends on what the Sui Foundation discloses, or potentially better alternatives. Feel free to brainstorm in the comments.

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