DeFi pioneer AC exits Sonic board amid sharp token decline

Author: Curry, Shenchao TechFlow

This year’s experience with crypto has been about watching the U.S. stock market hit new highs every day, then opening your portfolio, sitting in silence for three seconds, and closing it again.

BTC has fallen nearly 20% year-to-date, ETH even more so, and altcoins aren’t even worth mentioning. In this market, a 90% drop in any blockchain’s token is no longer newsworthy. But colder than the price decline is the sudden abandonment by people.

On June 19, DeFi patriarch AC and two other founding directors stepped down from the Sonic Labs board. At the time, the S token was trading at $0.028, a fraction of its year-high of $1.03, and the on-chain TVL had dropped from a peak of $1.14 billion in May last year to just $20 million—representing a 98% decline according to DefiLlama data.

The news of AC stepping down has drawn little reaction from the community. After all, he stepped away once back in 2022 before returning. His latest departure statement was also standard, stating that he “still believes in Sonic,” but will no longer be involved in business decisions.

However, the next paragraph is a prickly one.

He said that over the past 18 months, his primary focus has been on Flying Tulip. The project raised $200 million in a private round last August at a $1 billion valuation, and launched a public offering on CoinList in February this year. Investors include Brevan Howard, DWF Labs, and Susquehanna.

In other words, during the period when S dropped from 1.03 to 0.028, AC was busy laying the groundwork for an entirely new billion-dollar project.

More striking is the token design of Flying Tulip.

Investors in the primary offering receive an NFT called ftPUT, which essentially functions as a perpetual put option—allowing them to burn the token at any time and redeem their principal at the original price. CoinList’s public sale page clearly states that FTs (fungible tokens, i.e., regular tokens) purchased on the open market do not carry this right; only primary participants are eligible.

In contrast, S holders who buy on the secondary market accept the price as it is—down to $0.028, it’s $0.028. There’s no floor, no redemption, and no one has given you a safety net...

AC's exit statement on X was short, but each sentence seemed carefully weighed.

He said he joined Fantom in 2018 as a technical advisor and only officially became a director in December 2022. He is not and has never been the founder of Fantom, only its earliest technical architect. He was responsible for the underlying technology, including the core systems of Sonic and the cross-chain gateway.

Then comes the crucial section, which roughly says:

I am responsible for the technical decisions I led, but I did not initiate or make the decisions regarding the migration, airdrops, tokenomics, or the disposal of the old network.

I distanced myself from the 97% drop in the S token. The technology was developed by me, and it’s flawless. As for why the token you bought fell from $1 to $0.03, that was someone else’s decision.

I do not evaluate whether this claim is valid, but I acknowledge that the separation is so clean it’s impressive.

When most project founders flee, they either go silent or issue vague statements filled with “we” and “the team,” muddying the responsibility. AC is different—he clearly defined his area of responsibility so precisely that it’s hard to dispute, because he truly had nothing to do with the token economy.

And he didn't come up with this idea on a whim.

In March 2022, AC announced his exit from the crypto industry, citing regulatory pressure and burnout. At the time, Fantom’s TVL dropped by nearly one-third within a week, sparking widespread criticism from the community. Months later, he quietly returned, focusing on the technical overhaul of Sonic.

When leaving, you said you were tired; when returning, you said nothing; and when leaving again, you said, "Actually, I've been busy with other things over the past 18 months."

As for Sonic, over the past six months leading up to his departure, the executive team underwent multiple changes. Mitchell Demeter, who was hired as CEO in September last year, resigned in February this year, along with the head of business operations. After the CEO’s departure, the board stepped in to manage operations for several months, but has now stepped back as well, appointing Matt Visser—a new CEO with no prior experience managing a public blockchain—as the new leader.

Over five months, the entire management team was completely replaced. Sonic’s official statement made no excuses, directly stating, “The coin price dropped, and community sentiment fell—we won’t pretend otherwise.”

This kind of “lying flat honesty” is rare in the crypto industry. But the issue is that the team speaking frankly is the new one, while the person whose name carries value is the one who left.

Looking back at AC's trajectory over the past few years, you'll notice a pattern.

In 2020, he created Yearn Finance, the flagship product of DeFi Summer, whose TVL once surged to billions of dollars. He soon stepped away and let it run on its own—it performed reasonably well, but he was no longer closely involved.

Next, he worked on Fantom’s technical architecture, and Fantom surged. In March 2022, he announced his exit from the industry, after which Fantom entered a prolonged decline. Later, it was rebranded as Sonic and relaunched, and he returned with the title of CTO. Shortly after its launch, Sonic’s TVL peaked above $1 billion, then steadily declined to its current state.

Each time, he exits at the peak of popularity or just as it starts to cool down, moving on to the next project. Each time, the holders of the old project bear the brunt of the price drop after he leaves.

Flying Tulip is his fourth project to date. The author believes that, this time, he may have truly absorbed the lessons from his previous endeavors and incorporated them into the token design.

You participated in the public sale of Flying Tulip on CoinList, spending $0.10 to buy one FT, but instead of receiving the token itself, you received an NFT called ftPUT, which holds the token inside it. This NFT is the perpetual put option. You have three options available.

First, keep it as is: the token remains inside the NFT and cannot be traded, but your redemption right is always preserved. Whenever you decide to exit, burn the token and get back your original amount of USDC or ETH. No matter how much the secondary market price of the FT drops, your principal is protected.

Second, withdraw the token from the NFT for free trading. However, at the moment of withdrawal, the redemption right is permanently forfeited; the amount withdrawn will be released to the protocol for buyback and burn.

Article 3: Partial withdrawal, partial retention. The portion remaining in the NFT continues to be protected; the withdrawn portion is unprotected.

AC said something interesting in an interview with The Block, essentially stating that because of perpetual puts, the raised funds cannot be spent at all.

The actual funds raised were zero. Where did the operating expenses come from?

All raised funds are deployed into conservative strategies within lending protocols such as Aave and Ethena, targeting an annual yield of approximately 4%. At full funding of $1 billion, this would generate around $40 million in annual interest, which will be used to fund the team, development, and token buybacks. The team receives no initial token allocation; all FT tokens must be acquired from the open market using protocol revenues.

I must admit, this design is quite ingenious in the context of DeFi. It addresses one of the most notorious problems in the crypto industry over the past few years: project teams taking investors’ funds and disappearing, or squandering the money, leaving investors with total losses. AC’s solution essentially ties his own hands—the funds cannot be accessed, the team does not pre-allocate tokens, and investors can withdraw at any time.

But despite its sophistication, this protection applies only to the primary market. Tokens purchased on secondary exchanges after listing on FT do not come with ftPUT—this is clearly emphasized in bold on CoinList’s page.

Buyers in the open market see the same token but receive entirely different treatment.

This year, money has been flowing out of the crypto market—it's no secret.

BTC has declined nearly 20% since the beginning of the year, and the median decline among altcoins far exceeds this figure. For those in the space, switching from seeing Nasdaq hitting new highs on U.S. stocks back to their own portfolios requires no description—it’s palpable.

This year, many people have been gradually shifting their positions into U.S. stocks and stablecoin yield products, and the on-chain activity is visibly declining.

In this environment, AC’s exit from Sonic is just the tip of the iceberg. The entire L1赛道 is experiencing the same story—TVL shrinking, users departing, founding teams changing or vanishing entirely. Sonic simply became a case study because of its high profile and extreme decline.

But this AC case has something that other projects don't.

Flying Tulip is currently valued at approximately one billion dollars. Sonic’s current market cap is about one hundred million dollars. The same person, the same time period—one at a billion, one at a hundred million—a tenfold difference. The difference lies solely in which side AC’s name is attached to.

This is a fact in the DeFi industry that few are willing to speak openly about.

Many projects are valued not based on revenue, users, or technological barriers, but on the name of a single individual. As long as the name is there, the money is there. When the name leaves, the money follows.

The bear market has stripped away this fig leaf. In a bull market, all L1s rise—you can’t tell whether it’s fundamentals driving the gains or just the name. But when the tide goes out, what’s left becomes clear.

Another detail, which the author finds most interesting.

The initial deployment chain for Flying Tulip is Sonic. AC has exited Sonic’s board and no longer participates in any business decisions, but his new project’s first stop is on Sonic. He’s gone, but his business remains.

The captain left the ship but opened a new store on the dock, selling items even more expensive than those on board.