Marc Zeller, integrations lead at decentralized finance (DeFi) lending protocol Aave, claimed in a recent article on January 26 that the company has purchased 2.7 million Curve (CRV) tokens, clearing “excessive residual bad debt” over a dozen transactions within the next 15 hours.
The action was taken in response to the community’s ratification of Aave Improvement Protocol (AIP) 144, which deployed a swap contract to buy 2.7 million CRV units with a $3,105,000 USD Coin spend limit and a $1.15 maximum unit value.
The sophisticated exploit that occurred on November 23 is what led to the bad debt on the Aave protocol. Avaraham Eisenberg attempted to orchestrate a short squeeze and force developers to buy back his positions at up to 100% slippage due to lack of liquidity by taking on a series of heavy volume short CRV positions on Aave. Eisenberg previously drained DeFi protocol Mango Markets and caused $47 million in net damages.
Eisenberg is said to have lost $10 million on the trade because it turned out that Aave had far more liquidity than was initially thought. Nevertheless, there was some slippage as a result of the incident, and after liquidating Eisenberg’s investments, Aave was left with a total of 2.656 million CRV in bad debt.
On the same day, Eisenberg was sued by Mango Markets for his part in the $117 million exploit on October 12, 2022. In their case, they asked the court to revoke their $47 million bounty deal with the hacker.
Eisenberg is accused by the US Securities and Exchange Commission of stealing digital assets worth $117 million. On December 27, 2022, the Federal Bureau of Investigation made an arrest of Eisenberg in Puerto Rico on allegations of commodities fraud and manipulation.
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