Yesterday, an unfortunate situation occurred for the founder of Curve Finance, Michael Egorov, and for his entire crypto and DeFi community after large positions with CRV collateral were liquidated on the Llamalend protocol.
Forced liquidations have caused the CRV token to plummet by 40%, in addition to creating a “bad debt” typical of some DeFi platforms in certain situations.
Now, however, it seems to be all resolved, with Egorov having repaid almost all of the bad debts and the crypto of the Curve ecosystem having absorbed part of the decline marked yesterday.
Let’s see everything in detail below.
Summary
The founder of Curve Michael Egorov undergoes a liquidation of a large loan in DeFI: the crypto CRV collapses by 40%
Yesterday afternoon we witnessed a dramatic event in the crypto DeFi world: Michael Egorov, the well-known founder of the Curve Finance project, was liquidated from some large borrowing positions for 100 million dollars in stablecoin, with collateral in CRV.
In total, as reported by “lookonchain”, 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.
Lo stesso Egorov ha ammesso su X di essere stato liquidato, e che insieme al suo team stava cercando di ristabilire l’ordine e tornare alla normalità.
The cascade of liquidations immediately triggered a forced collapse in CRV prices, which during the day reached 0.219 dollars for a maximum variation of about -40%, then slightly recovered 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 a trading pair and ballast in trading pools across the ecosystem.
An address on Frax Lend, for example, saw a collateral of 3.3 million dollars evaporate after the prices of CRV collapsed, falling below the value of the amount borrowed.
It is worth noting how Arkham Intelligence had previously pointed out the risks that the founder of Curve Finance was facing, given that he was at risk of liquidation on five protocols, and the recall mechanisms would be triggered if the value of the collateral dropped by 10%.
Furthermore, his borrowed position was so large that it represented 90% of the crvUSD tokens present in Llamalend, costing him an annualized APY of 120% as a funding rate for the loan.
As explained by Arkham:
“$50 million in crvUSD loans from Egorov are on Llamalend, which currently costs him ~ 120% APY. This is because there is almost no crvUSD remaining available for lending against CRV on Llamalend. 3 of Egorov’s accounts already represent over 90% of the crvUSD borrowed on the protocol.”
In the last 24 hours Egorov is down by 1.12 million dollars after yesterday’s incident.
The Akham dashboard shows us how his address had reached a PNL of +600 million dollars at the end of the bull run of 2021, only to return to negative in 2022.
It is not the first time that liquidations of this type occur on Egorov and his DeFi platform.
In 2023, an exploit of several Curve lending pools suddenly caused CRV prices to dump, putting over 100 million positions at risk of liquidation.
On that occasion, the billionaire Justin Sun intervened to provide liquidity and prevent the formation of bad debt, purchasing CRV at a discount compared to the pre-exploit price, avoiding a potential systemic collapse.
Repaid the bad debt of 10 million dollars by selling off the crypto CRV and other assets
Egorov immediately warned the crypto community on X about having suffered a large liquidation in DeFi and having taken steps to pay off a large part of the bad debt of 10 million dollars that had formed, reimbursing 93% and committing to repay the remaining portion.
For “bad debt”, or uncollectible debts, in finance it means a credit that is highly unlikely to be paid by the debtor. In DeFi this situation occurs when, for example, in a lending protocol cascades of liquidations happen and few individuals hold significant amounts of tokens deposited as collateral in the pool.
Egorov highlighted how it will help users not to suffer from this situation: despite this, the developer has in a certain sense “taken advantage” of his own community and the holders of CRV by putting the resource as collateral to borrow stablecoin, and then selling CRV at a low price to repay the debt. Not exactly ethical behavior for the founder of a famous crypto protocol in DeFi.
In any case, Egorov after the incident immediately mobilized to quickly repay part of the amount borrowed on Inverse, UwU Lend, Fraxlend, and Curve LlamaLend to mitigate the risks of liquidation.
In the early Asian hours, as shown by the screenshot of the transactions from his address, the head of Curve has conducted various swaps between CRV and USDT and repaid part of the debt with the tokens FRAX, DOLA, and CRV.
In the midst of market turbulence, Egorov praised Curve Finance’s soft liquidation mechanism for successfully handling a stress test after the hack of the UwuLend protocol, which occurred just as CRV was dumping on the market.
Here is what he said himself on X:
“The system showed fantastic performance. This gave the liquidators time to prepare funds and liquidate the hacker’s OTC position. As a result, the system no longer has funds for the hackers, no bad debt, everything works well.”
We also point out how this news has been reported in a totally inaccurate way by several online newspapers that (in an extremely unprofessional manner) have reported the tweet of a fake user pretending to be the founder of Curve, claiming to have burned 10% of the CRV supply to support the price.
Absolutely false.
Always be careful about which sources you are relying on.
