Arbitrum watchdog gives three DeFi projects deadline to address misuse findings

The Arbitrum Watchdog Committee, which oversees grant compliance, has warned three DeFi projects that they must answer serious misuse allegations and return disputed ARB tokens by a tentative September 10 deadline. Failure to do so could trigger separate off‑chain Snapshot votes to permanently exclude the projects from future Arbitrum DAO programs.

Projects under scrutiny

• Good Entry – On‑chain analysis indicated that 142,839 ARB was distributed to 1,032 ineligible users during and after its Short‑Term Incentives Program. The committee also flagged self‑farming by wallets linked to team addresses and noted the project’s refusal to provide clarification.
• Limitless – Accused of swapping 75,000 ARB into USDC and moving the proceeds to Base. Team members could not be reached for clarification or recovery.
• APX Finance (formerly ApolloX) – Linked to 239,714 ARB across multiple issues, including a large portion of unutilized treasury funds, late transfers to distributor contracts, and alleged team‑linked Sybil activity.

Potential consequences

If a project’s explanation is unsatisfactory and the disputed ARB is not returned within the one‑week window, the committee will proceed with an off‑chain Snapshot vote. A ban would make the project’s founders, current team members and affiliated contributors ineligible for future Arbitrum DAO programs. For inactive projects, the ban would apply only to founders. The measure is a governance‑access sanction and does not freeze wallets or disable protocols.

Broader context

As of early September, the Arbitrum grant program had received 90 reports, recovered roughly 532,000 ARB and distributed about 268,000 ARB in reporter bounties. The next step hinges on whether the three projects respond before the September 10 deadline and whether the committee moves forward with its tentative voting schedule.