Curve founder liquidated for $100 million

Yesterday, an unfortunate situation occurred for Curve Finance founder Michael Egorov and his entire crypto and DeFi community after large CRV-collateralized positions were liquidated on the Llamalend protocol.

The forced liquidations caused the CRV token to fall by 40%, in addition to creating a “bad debt” typical of some DeFi platforms in certain situations.

But now everything seems to be resolved, with Egorov having paid off almost all of the bad debts and the crypto in the Curve ecosystem having absorbed some of the decline marked yesterday.

Let’s see everything in detail below.

Curve Founder Michael Egorov Suffers Liquidation of Large DeFI Loan: CRV Crypto Collapses 40%

Yesterday afternoon we witnessed a dramatic event in the world of crypto DeFi: Michael Egorov, the famous founder of the Curve Finance project, was liquidated from some large borrowing positions for $100 million in stablecoin, with CRV guarantee.

In total, as “lookonchain” reports, shortly before the incident, the Russian developer had 4 open positions on Inverse, uWuLend, Llamalend and Fraxlend, but only the one on Llamalend felt the weight of the liquidations.

The same Egorov has amassed his X in his liquidated state, and he is present to his team with the aim of restoring order and returning to normality.

The cascade of liquidations immediately triggered a forced collapse in CRV priceswhich reached $0.219 during the day for a maximum variation of around -40%, then recovered slightly in the following hours.

The liquidation of such a large position has started to put pressure on other DeFi protocols, as CRV is used as trade pair and ballast in trading pools across the ecosystem.

One address on Frax Lend, for example, saw $3.3 million in collateral evaporate after CRV prices collapsed, falling below the value of the amount borrowed.

It is interesting to note how Arkham Secret Service had previously highlighted the risks facing the founder of Curve Finance, given that it was at risk of liquidation across five protocols, and that recall mechanisms would be triggered if the value of the collateral fell by 10%.

Additionally, his borrowed position was so large that it represented 90% of the crvUSD tokens present in Llamalend, costing him a 120% annualized APY as the loan funding rate.

As explain by Arkham:

“$50 million of Egorov’s crvUSD loans are on Llamalend, currently costing him about 120% APY. Indeed, there is almost no crvUSD left available for loans against CRV on Llamalend. Three of Egorov’s accounts already account for over 90% of the crvUSD borrowed on the protocol.

Over the past 24 hours, Egorov lost $1.12 million after yesterday’s incident.

The Akham dashboard shows us how its address had reached a PNL of +$600 million at the end of the 2021 bull run, only to return to negative in 2022.

This is not the first time liquidations of this type have occurred on Egorov and its DeFi platform.

In 2023, an exploit of multiple Curve lending pools suddenly caused CRV prices to plummet, putting more than 100 million positions at risk of liquidation.

On this occasion, the billionaire Justin Sun intervened to provide liquidity and prevent the formation of bad debts, by purchasing CRVs at a lower price than before exploitation, thus avoiding a possible systemic collapse.

Paid off $10 million bad debt by selling crypto CRV and other assets

Egorov immediately warned the crypto community on pay off much of the $10 million bad debt that had formedrepaying 93% and committing to repay the remaining portion.

For “bad debt,” or bad debt, in finance, this means credit that is very unlikely to be paid by the debtor. In DeFi this situation arises when, for example, in a lending protocol waterfalls Liquidations occur and few individuals hold significant amounts of tokens deposited as collateral in the pool.

Egorov highlighted how this will help users not to suffer from this situation: Despite this, the developer has in a certain sense “benefited» of one’s own community and CRV holders by putting the resource as collateral to borrow stablecoin, then selling CRV at a low price to repay the debt. Not really ethical behavior for the founder of a famous crypto protocol in DeFi.

Regardless, Egorov immediately mobilized after the incident to quickly repay part of the amount borrowed from Inverse, UwU Lend, Fraxlend and Curve LlamaLend in order to mitigate the risks of liquidation.

In the early hours of Asia, as shown in the screenshot of transactions from his address, the boss of Curve carried out various exchanges between CRV and USDT And repaid part of the debt with FRAX, DOLA and CRV tokens.

Amid market turbulenceEgorov praised Curve Finance’s soft liquidation mechanism for having passed a resistance test after the hack of the UwuLend protocol, which occurred at the same time as CRV was dumping on the market.

Here’s what he himself said about X:

“The system showed fantastic performance. This gave the liquidators time to prepare the funds and liquidate the hacker’s OTC position. Result: the system has no more funds for hackers, no more bad debts, everything works well.”

We also point out that this news was reported completely inaccurately by several online newspapers. who (extremely unprofessionally) reported a tweet from a fake user posing as the founder of Curve, claiming to have burned 10% of CRV’s supply to prop up the price.

Absolutely false.

Always be careful about the sources you rely on.

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