A notorious crypto trader, who last month rejoiced to have earned over $100 million in a controversial price manipulation maneuverappears to have lost millions in a similar exploit attempt that backfired early Tuesday.
Avraham Eisenberg, the trader behind October’s Mango Market Hackrecently borrowed 40 million curve tokens (CRV) from decentralized lending platform Aave, according to string data. The drastic move is part of an apparent plan to sell the tokens, drop CRV’s value accordingly, and get rid of million in short positions on the token, leaving Aave struggling with a massive amount of bad debt.
However, the scheme did not perform as expected. The price of CRV fell early Tuesday from $0.53 to $0.41, but then recovered quickly, hitting $0.71. At the time of writing, CRV is up 31% in the past 24 hours to $0.67, according to data from CoinGecko.
A few weeks ago, Eisenberg publicly laid out a plan to manipulate a loophole in Aave’s lending policies that would theoretically allow a scheme like the one the trader attempted on Tuesday to succeed.
I have been told that aave is perfectly safe, so here is the potential trading strategy. No financial or legal advice, but if you make 9 figures on this, feel free to tip
Note that starting with more initial capital increases the chances of success and the profit percentage pic.twitter.com/HKAF7Y5ogM
Yet in the weeks that followed, neither Aave nor Gauntlet – the financial modeling platform employed by Aave – took precautionary measures to prevent an exploit like the one described by Eisenberg from occurring.
On Tuesday afternoon, after Eisenberg’s short strategy failed, Gauntlet released a statement to clarify that Aave emerged relatively unscathed from the incident.
“Attempt to squeeze CRV on Aave was unsuccessful and unprofitable,” Gauntlet tweeted. “Despite this, Aave has accumulated a much smaller insolvent position.”
The attempt to press CRV on @AaveAave failed and was not profitable. Despite this, Aave has accumulated a much smaller insolvent position
Our immediate recommendation is to freeze a number of tail assets on v2 to mitigate the risk of similar, likely unprofitable cuts.
This smaller insolvency amounts to $1.6 million in bad debts on Aave’s side, according to blockchain data analyzed by Blockanalytica– an amount that could have been much larger if Eisenberg’s feat had succeeded.
In a Answer to a since-deleted tweet, Gauntlet announced that it would help cover the $1.6 million loss as part of its repayment program in the event of insolvencywhich undertakes to cover losses suffered by clients such as Aave due to flaws in Gauntlet’s “risk parameter optimizations”.
A few hours after the failure of the Eisnberg CRV maneuver, an Aave governance proposal was drafted to prevent a similar scheme from manipulating other cryptocurrencies on the platform in the future.
Some members of Aave DAO reacted negatively to the proposal.
“Better late than never, right?” a member wrote. “Gauntlet should have made this proposal long before Avi pulled the trigger. What were you doing all this time while Avi was bragging about his attempt to economically exploit AAVE? »
Last month, when Eisenberg recovered more than $100 million from Solana-based Mango Markets via oracle price manipulation, Mango DAO agreed to drop any criminal charges against the trader – if he returned $67 million. dollars of funds seized to help the organization cover its bad debt.
Eisenberg accepted the deal; the next day he turned out as the trader behind the maneuver, calling the event, widely considered a hack, a “highly profitable trading strategy”.
He did not immediately respond to a request for comment on Tuesday’s events from Decrypt.
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