Kujira Foundation’s Leveraged Bets Backfire, Leading to 55% Drop in KUJI Token Prices

Developers revealed that the team’s positions were “targeted” and announced plans to establish an operational DAO to take control of the Kujira Treasury and core protocols.

The Kujira Foundation’s lack of risk management in financial bets resulted in a 55% plunge in KUJI token prices within 24 hours. The liquidations of leveraged positions by Kujira’s operational wallet led to substantial losses and further price declines. To address this, Kujira plans to create a DAO to manage its treasury and core protocols, aiming to reduce debt and enhance transparency.

The Kujira Foundation, which develops and maintains the Cosmos-based Kujira blockchain, experienced significant losses as leveraged liquidity positions backfired. On Thursday, wallets belonging to the Kujira Foundation saw their KUJI holdings automatically liquidated when leveraged positions turned into millions of dollars in bad debt during a period of market volatility.

These liquidations occurred because loans taken from publicly allocated KUJI tokens became undercollateralized, triggering a cascade of sell-offs that further drove down KUJI prices. Liquidations happen when a trader’s leveraged position is automatically closed due to a partial or total loss of their initial margin, unless additional funds are provided to maintain the position.

In a Telegram broadcast on Thursday, a Kujira team member explained that the leverage positions were intended to boost the network’s applications. “As a team, we thought the best use of a portion of ops funds would be to leverage and deploy across the ecosystem to bootstrap liquidity and activity,” wrote @team_kujira. “We genuinely felt like this was the correct course of action.”

However, the team faced targeted attacks on their positions, exacerbating the situation. “People targeted the team positions, and it’s been a constant fight since these positions were created,” they added.

Kujira had more than $124 million in locked funds at its peak in March 2024. This value dropped to $50 million earlier this week and further declined to $35 million on Friday morning following the KUJI token liquidations.

In a Friday post on X, the team announced plans to create a decentralized autonomous organization (DAO) to take ownership of the Kujira Treasury and core protocols. The DAO’s initial mandate will be to safely reduce debt, with the treasury holding 14 million KUJI, worth $5.5 million at current prices.

“This DAO will also assume control of the configuration of the core Kujira Protocols,” the team wrote. “Combined with upcoming admin dashboards, this will create transparency over how these protocols run and allow the community to propose changes that will be voted on by members of the DAO.”