Mango Market’s exploiter Avraham Eisenberg’s attempt to replicate his “highly profitable trading strategy” on decentralized finance (DeFi) protocol Aave failed, resulting in the loss of millions. According to on-chain analytics firm Lookonchain, an address associated with Eisenberg, $40 million (approximately Rs. 325 crore) worth of USD Coin (USDC) has been transferred to Aave to borrow Curve (CRV) token with the intention of going short. This resulted in the CRV price falling by about 26 percent to $0.464 (about Rs. 37.34) from $0.625 (about Rs. 51.14) last week.
That said, the move didn’t quite go as planned as the community rallied behind CRV, buying the DeFi token and its value rose 46 percent in the past 24 hours to $0.71 (approximately Rs. 57.63) .
CRV war was played out #Aave yesterday and ended with the taller beating the shorter.
— Lookonchain (@lookonchain) November 23, 2022
Blockchain analytics firm Arkham Intelligence tweeted that Eisenberg could trick people into believing he was shorting CRV to trigger the liquidation of Michael Egorov, founder of the DeFi network.
According to Arkham Intelligence, Eisenberg’s real target was that of AAVE vulnerable looping system and its loans could leave the DeFi network with serious bad debts. The blockchain analytics firm added: “In order to liquidate Avi’s position, AAVE liquidators will not be able to buy back all of the CRV he borrowed. On-chain, there is no liquidity to repay more than ~20 percent of the position. AAVE will have to sell significant amounts of security module tokens to cover this loss.”
In October, explained Eisenberg that it was possible to manipulate Aave’s credit policy to borrow massively, dump it, and leave Aave in bad debt.
After the failure of the short strategy, Aave said the CRV pool liquidation process was successful and proceeded as planned. But it noted that the position was not fully covered as there were 2.6 million CRV ($1.6 million or about Rs. 13 crore) left, representing less than 0.1 percent of the positions on the protocol.
2/6 A large CRV loan accrued over the past week was largely settled through the protocol liquidation process. However, the position was not fully covered and 2.64 million CRV (≈ $1.6 million at present value) remains. This represents < 0.1% of the loans on the protocol.
— Aave (@AaveAave) November 22, 2022
There is now a new governance proposal live on Aave that will prevent another price manipulation on the platform.
Meanwhile, the Aave community pointed out that the developers could have done something to prevent this scenario, as they had previously received several warnings about the possibility.