Curve founder Michael Egorov has successfully repaid the $10 million in bad debt caused by soft liquidations following a hacking attempt on June 13.
After the incident, Egorov took to social media to clarify that the size of his positions had overwhelmed the markets, resulting in $10 million of bad debt. He also mentioned that he had already paid off 93% of the debt.
The Hack
The hacking attempt on June 13 led to soft liquidations of Egorov’s positions due to a sudden increase in borrowing costs. At the peak of the crisis, Egorov faced $140 million in liquidations because of $95 million in stablecoin debt and a $60 million annual fee to maintain his positions.
Moreover, Curve’s token, CRV, experienced a sharp drop during the incident, plunging by 28%. In response, the Curve founder suggested burning 10% of CRV tokens, amounting to $37 million, to stabilize the token price. He also offered increased APY to voters supporting the proposal.
Curve’s recent troubles have raised concerns about the risks posed by Egorov’s debt positions to the platform’s stability, as highlighted in a 2023 Delphi Digital report. The report warned that Egorov’s $100 million in loans across DeFi protocols could potentially trigger a collapse in DeFi.
LLAMMA Soft Liquidation Mechanism Performs as Planned
Despite the challenges faced by the Curve platform, Egorov explained that LLAMMA’s soft liquidation mechanism worked as intended. This mechanism gradually erodes a borrower’s “health” as a debtor and slowly liquidates their funds. When the borrower’s health reaches 0%, a hard liquidation occurs, closing out the loan.
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