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News/Curve Finance Founder Faces Major Liquidations Amid CRV Crash

Curve Finance Founder Faces Major Liquidations Amid CRV Crash

Van Thanh Le

Jun 14 2024

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Cubic robot's head exposes DeFi contracts, liquidated CRV flows

Curve Founder's Crypto Bet Backfires, Leading to Massive Liquidations

Michael Egorov, the founder of Curve Finance, has experienced significant financial turmoil as the value of Curve’s governance token, CRV, plummeted. The sharp decline in CRV’s price led to tens of millions in liquidations, drastically reducing Egorov’s holdings. The CRV price has sunk as low as $0.23 (even reaching $0.21 on Binance), setting a new all-time low for the token, and has since rebounded slightly at the time of writing.

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On June 13, on-chain analytics team Lookonchain highlighted Egorov’s plight, revealing his collateral across four lending protocols had been slashed to just $33.9 million in CRV, supporting $20.6 million in debt. This massive liquidation event followed Egorov’s initial use of $141 million in CRV to secure $95.7 million in stablecoin loans through DeFi lending protocols like Inverse, UwU Lend, Fraxlend, LlamaLend, and Aave, as noted by Arkham Intelligence.

Egorov’s positions on Inverse and UwU currently have a health rate of 1.64 and 1.16 at the time of writing, respectively. Egorov has begun repaying the borrowed stablecoin DOLA, on-chain data shows.

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Source: DeBank

A day earlier, Arkham reported that $50 million of Egorov’s loans were in crvUSD from LlamaLend, draining the protocol’s crvUSD pool and incurring an annual interest rate of around 120%. They warned that a mere 10% drop in CRV’s price could trigger Egorov’s liquidations in the thread below. 

Egorov faced a $5 million liquidation on UwU Lend, and while he made some repayments on Inverse, it was not enough to prevent further losses. The overall impact saw about 78% of his holdings liquidated to cover his debts.

Curve Finance’s lending protocol, Curve Lend, has also suffered from the CRV downturn. On June 13, Curve contributor Saint Rat tweeted that the protocol had accrued $11.5 million in bad debt. This debt could be cleared if CRV’s price rises to $0.33, a significant jump from its current value of around $0.28.

Egorov was able to lower his bad debt to around $1 million after receiving $6 million worth of Tether (USDT) in two separate transactions from Christian Seale, a NextGen Venture Partner. Seale confirmed this on Twitter, aligning with publicly available onchain data.

Large investors, known as whales, were significantly impacted by a series of liquidations PeckShieldAlert data revealed a whale losing 29.6 million CRV tokens when the price fell below $0.25. Spot On Chain also identified a whale with the address 0xF07, who deposited 29.62 million CRV (valued at $7.68 million) to Binance due to a liquidation event on Fraxlend.

This situation isn't new for Egorov, who last year faced a similar crisis. At that time, $60 million in loans borrowed from Aave by Egorov threatened to leave the protocol with bad debt if liquidated. In response, Gauntlet, a risk management firm, recommended freezing Aave’s v2 CRV market to prevent further risks, a proposal that passed in August 2023. To address his mounting debts, Egorov sold 106 million CRV in private deals for $46 million, which helped him pay off his Aave debts by September with an $11 million USDT deposit.

As of June 14, Curve Finance founder Michael Egorov has repaid 93% of $10 million in bad debt stemming from the protocol's soft liquidation triggered by a hack attempt. 

The liquidation was triggered when Egorov's large CRV holdings, used as collateral for borrowing stablecoins, caused market instability. Egorov's borrowing positions were so large that they accounted for over 90% of the borrowed crvUSD on Llamalend, making them susceptible to liquidation if the CRV price dropped. 

Despite the liquidation, many believe Egorov benefited from the situation, as selling his CRV on the market would have resulted in similar prices and negative community sentiment. 

On-chain data revealed that Egorov transferred $31 million in borrowed USDT to Bitfinex in April 2023, followed by his wife's purchase of a $41 million mansion in Melbourne in May 2023. These events have fueled accusations that Egorov cashed out before the liquidation, transferring the losses to the community. 

In response to these claims, Egorov has publicly declared his unwavering commitment to the project's development.

Conclusion

Curve Finance founder Michael Egorov faced massive liquidations after a CRV price crash wiped out a substantial portion of his holdings used as collateral for multi-million dollar loans across several DeFi protocols. Despite receiving aid, Egorov still suffered major losses in this liquidation crisis.

FAQs

1: What led to Michael Egorov's liquidations?

The sharp decline in the price of CRV, Curve Finance's governance token, caused Egorov's collateral backing his stablecoin loans to become undercollateralized, triggering liquidations across multiple lending protocols.

2: How much value did Egorov lose in the liquidations? 

Initially owing $95.7 million in stablecoin loans backed by $141 million in CRV, Egorov's collateral was slashed to only $33.9 million after liquidations, resulting in around 78% of his holdings being lost.

3: Which lending protocols were impacted by Egorov's liquidations?

Egorov's positions were liquidated on Inverse, UwU Lend, Fraxlend, LlamaLend, and Aave, with Curve's own Curve Lend protocol also accruing $11.5 million in bad debt.

This article has been refined and enhanced by ChatGPT.

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