According to reports on social media and Pac Finance’s official Discord server, users of the decentralized finance (DeFi) app Pac Finance suffered $24 million in liquidations on April 11. This was a result of a sudden parameter change made by a developer wallet. The team has been notified of the issue, but as of now, no announcement has been made regarding the incident.
Pac Finance is a crypto lending app that operates on the Blast network. It allows crypto holders to deposit funds and earn interest by lending their capital. To ensure repayment, the app only allows borrowers to take out loans equal to a percentage value of their collateral, known as the “loan-to-value ratio” (LTV). Normally, changes to the LTV are only made after an announcement.
According to Blast network’s blockchain data, at 1:06 am UTC on April 11, a developer wallet called a function on Pac Finance’s PoolConfigurator-Proxy contract, setting the LTV for Renzo Restaked Ether (ezETH) at 60%.
Smart contract developer Roffet.eth stated that this parameter change led to the liquidation of many ezETH leveraging farmers, as they were found to be violating the collateral rules for the protocol. Roffet criticized the change as “arbitrary” since it was done without warning.
Parsec Finance founder Will Sheehan also criticized the change, noting that it occurred seemingly without warning. Sheehan estimated that borrowers lost approximately $24 million in collateral as their assets were automatically sold off to repay their loans due to this change.
In response to the liquidations, Pac Finance users voiced their complaints and demanded answers on the protocol’s official Discord server. The team’s Discord moderator, Bountydreams, announced that they were trying to contact the team for an explanation but had not received a response by 7:55 pm.
While mass liquidations are common for leveraged traders, they typically occur due to sudden changes in cryptocurrency prices, not protocol changes. For example, leveraged Bitcoin traders were liquidated for over $165 million on April 2 during a flash crash, and another $110 million in Bitcoin positions were liquidated on April 9 due to a sudden price increase.
This is an ongoing story, and more information will be provided as it becomes available.