Monetalis Group, a firm that manages almost $1.5 billion worth of US Treasuries on behalf of stablecoin issuer MakerDAO, has survived an ouster vote prompted by missed deadlines and an underwhelming return on its investments.

The two-week voting period ended Monday, with almost 59% of votes in opposition to Monetalis’ ouster. Supporters led for part of the voting period, but several votes from major MakerDAO delegates swung the contest in Monetalis’ favour last week.

Nevertheless, the proposals’ author has called the outcome a “moral victory.”

On Friday, Monetalis furnished several long overdue reports and said it had scheduled an overdue audit for July. Additionally, it said it would cede its reporting responsibility to another firm, AccountAble.

“We thank Monetalis for acknowledging the community’s concerns and proactively arranging for handover of duties and compensation to AccountAble in an orderly fashion,” MakerDAO delegate GFX Labs, which led the effort to oust Monetalis, wrote in MakerDAO’s governance forum Friday.

In DeFi, delegates are people or entities that vote on governance matters on behalf of holders of a protocol’s tokens.

Maker issues the DAI stablecoin. It was the fourth-largest DeFi protocol Monday, with more than $7.7 billion in user deposits.

DAO controversies

The struggle over Monetalis’ stewardship of MakerDAO investments is the latest controversy to roil crypto cooperatives known as decentralised autonomous organisations, or DAOs, and to highlight the power that protocol founders wield — indirectly or otherwise — in the DAOs they were supposed to cede control to.

MakerDAO founder Rune Christensen is a principal investor in Monetalis, according to the investment manager’s website. He is currently pursuing a major, controversial revamp of the Maker protocol, in part to combat voter apathy in the DAO.

Monetalis didn’t immediately reply to a request for comment.

The firm manages a pair of investments in US Treasuries on Maker’s behalf, dubbed Clydesdale and Coinbase Custody.

GFX proposed Monetalis’ ouster after the firm failed to meet several reporting deadlines, as well as a promised audit. Furthermore, Clydesdale never returned more than 4% to MakerDAO, despite the 5% yield on US Treasuries.

BlockTower, another firm managing US Treasury investments on MakerDAO’s behalf, returned about 5% in that same period, according to GFX.

“Monetalis has a long pattern of failing to produce reports as required, failing to ensure their accuracy when they do, and its Clydesdale vault has dramatically underperformed both its underlying assets and Andromeda, which shares the same investment mandate,” GFX wrote on May 7, referring to the BlockTower-managed investment.

Monetalis’ response

Responding in MakerDAO’s online governance forum, Monetalis said, “The standards for reserve reporting and structure were materially increasing for stablecoins” and it had “underestimated” the time it would take to improve its own reporting.

The firm also denied that mismanagement of its Treasury investments had cost MakerDAO millions of dollars in foregone revenue.

Among other things, the investments’ Swiss-based management faced higher costs, according to Monetalis.

“But these costs come with benefits derived from having varied transaction structures, relationships with a wider set of service providers, diversification of jurisdictional frameworks and access to different rails,” the company wrote.

Several companies jumped in to offer their own services, including Mountain Protocol and Superstate.

Shortly after voting began on June 10, several large delegates cast votes to oust Monetalis, and it seemed as though GFX’s proposal would succeed.

“Monetalis underperformed as an Arranger and failed in its duties to report the results, despite several calls to action from the community at large, and didn’t provide a plausible justification for it,” pseudonymous MakerDAO delegate StoneWill wrote after casting its vote.

Delegates against GFX’s proposal

But several large delegates cast votes in opposition to GFX’s proposal last week, tipping the scales in the company’s favour.

One pseudonymous delegate, Vigilant, said it wouldn’t fault Monetalis for attempting to overhaul its reporting structure or for the additional costs of operating out of Switzerland.

Nevertheless, Monetalis furnished many of the overdue records on Friday, and said the reports would be prepared by AccountAble in the future.

“We accept responsibility for the missed reporting,” CEO Allan Pedersen said. “We will note that we acted in absolute good faith throughout this process and period.”

GFX said it would still advocate for Monetalis’ removal, but called Pedersen’s announcement a win.

“GFX’s original demands have been met,” GFX’s pseudonymous MakerDAO delegate, PaperImperium, wrote on X.

“Failure to produce these documents by a May 15th deadline is what prompted the offboarding proposal.”

Have tips about Maker and other DeFi protocols? Contact the author at aleks@dlnews.com.