Aave Purchases 2.7M CRV To Clear Remaining Bad Debt

DeFi lending protocol Aave has revealed that it has eliminated the bad debt accumulated after a botched trade by Mango Markets hacker Avraham Eisenberg.

Eisenberg was liquidated from his position on Aave following a botched trade, ending up with a loss of $10 million instead.

Bad Debt Cleared

Decentralized finance (DeFi) protocol Aave has eliminated its bad debt of around 2.7 million Curve DAO (CRV) tokens, the protocol has revealed. The bad debt resulted from a botched trade by Avraham Eisenberg, the same individual behind the Mango Markets exploit. Aave cleared the debt after its community approved the purchase of the necessary CRV tokens via the ParaSwap decentralized exchange aggregator through a governance vote which drew to a close on Tuesday.

According to the protocol, following the purchase of the 2.7 million CRV tokens, the excessive bad debt would be cleared over a dozen transactions within the next 15 hours. The community approved the Aave Improvement Protocol (AIP), deploying a swap contract to acquire the 2.7 million CRV using a USD Coin (USDC) spend limit of $3,105,000.

A Botched Trade

The bad debt on Aave was the result of a sophisticated exploit orchestrated by Avraham Eisenberg on the 23rd of November, 2022. Eisenberg was also behind the Mango Markets exploit, causing a loss of around $47 million to the protocol. Eisenberg took on a series of heavy short positions on Aave, attempting to orchestrate a short squeeze and force developers to purchase his positions at a slippage upward of 100% thanks to a lack of liquidity.

However, Aave had significantly more liquidity than Eisenberg anticipated, leading to him losing over $10 million on the trade. However, some slippage still occurred thanks to the attempt, leaving Aave with around 2.656 million CRV of bad debt while liquidating Eisenberg’s positions. An analysis by DeFi data platform EigenPhi revealed that the liquidator of the bad debt was able to pocket around $1 million in profit thanks to the recent upswing in the crypto markets.

The Mango Markets Fallout

Mango Markets has also filed a lawsuit against Eisenberg and has asked the court to rescind its agreement with the hacker for the $47 million bug bounty for his role in the $117 million exploit of the Mango Markets protocol. Eisenberg has also been charged by the United States Securities and Exchange Commission (SEC) with stealing $117 million worth of digital assets, with the hacker arrested in Puerto Rico by the Federal Bureau of Investigation (FBI) on the 27th of December, 2022. Eisenberg has been arrested on charges of commodities manipulation and commodities fraud.

Eisenberg became notorious in the crypto ecosystem after the Mango Markets hack, which he called a “highly profitable trading strategy.” Eisenberg cut a deal with the Mango Markets team at the time, agreeing to return half of the stolen funds to cover losses. The hack met with a furious backlash from the DeFi community, who were highly critical of his actions.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.