This announcement coincided with a trader (presumed to be Avraham Eisenberg) borrowing the available CRV tokens on Aave, which totaled more over $50 million. DEX Curve Finance introduced its first native stablecoin, crvUSD, and this news came at the same time. Because of a string of erratic movements in the price of the CRV, that position has reached the point where it must be liquidated.
Aave addressed the situation via Twitter.
1/6 We want to address the cycle of liquidations that occurred in the CRV pool on the Aave Protocol today. The liquidations were successful (and worked as designed), but unfortunately, the size of the position left some excess debt within the protocol.
— Aave (@AaveAave) November 22, 2022
“The liquidations were successful (and worked as designed), but unfortunately, the size of the position left some excess debt within the protocol.”
It would seem that Curve Finance fell prey to a coordinated assault on the part of short sellers.
According to the conversations that have taken place about the trade (which can be found here), the trader has been previously linked to the controversial Mango Markets exploit on the Solana network. Furthermore, it is believed that the trader is accumulating a CRV short position in order to profit from a price decline.
Mango 'very profitable trading strategist' @avi_eisen has an $8m short on CRV.@CurveFinance founder @newmichwill has $48m of CRV supplied on Aave with a liquidation price of .259
Yesterday they had an interesting discussion in the Convex discord.
🦙🏫 ↓ pic.twitter.com/t28vN9l2PZ
— LlamaCollege (@LlamaCollege) November 21, 2022
The perpetrator of the Mango Markets attack first obtained CRV via a loan by swapping $40 million worth of USDC stablecoin. It is said that this led to the price of CRV falling from $0.625 to $0.464 throughout the course of the week.
By 1:10 pm ET, the whole position had been liquidated, leaving the Aave protocol with 2.64 million CRV (about $1.7 million) in bad debt. As of 12:20 pm ET, the exploiter had around $58 million in USDC backing a $50 million loan in CRV.
The protocol liquidation procedure was able to clear out the majority of a substantial CRV borrow that had been building up over the course of the previous week. However, the position was not covered in its whole, and 2.64 million CRV (about $1.6 million at the current value) is still outstanding. Clarifications received from Aave on how this equates to less than 0.1% of the total borrowings on the protocol.
The owner of the CRV-borrowed wallet transferred the tokens to OKX.
Compiled by Coinbold