Curve founder's $168M loan position at risk of liquidation

Authors: Krisztian Sandor, Sage D. Young, Sam Kessler, Coindesk; Compilers: Songxue, Jinse Finance

DeFi giant Curve Finance’s breach drove down the price of its CRV token, putting founder Michael Egorov’s $168 million at risk of liquidation.

This could put pressure on the DeFi ecosystem as seized assets must be sold into markets where prices have fallen.

The chaos at Curve Finance has put the $168 million loan position held by founder ** Michael Egorov at greater risk of liquidation, and if this happened, it could have a huge impact on the entire decentralized finance (DeFi). **

Data from blockchain analytics site DeBank shows **Egorov owns $168 million in CRV (Curve’s native token), lending to multiple DeFi protocols. This is almost equivalent to 34% of the token’s total market capitalization. **

Following the leak on Curve over the weekend, the price of CRV fell by more than 20%, bringing Egorov closer to being liquidated.

** Mandatory liquidation would be another serious blow to Curve, a critical infrastructure in the DeFi economy. ** The protocol suffered a major attack that stole ~$70 million in assets from users. The total value of assets locked on the curve fell from $3.7 billion to $2.1 billion as many investors withdrew their funds as a precautionary measure.

If Egorov’s loan was liquidated, the lending protocol would have to sell the seized assets, flooding the market with CRV tokens at a time when prices were already spiraling downward.

He locked up about $168 million in CRV tokens on lending platform Aave for a $63 million loan via Tether's USDT stablecoin. According to DefiLlama, Egorov’s CRV collateral was liquidated at 37 cents; CRV is currently trading at around 55 cents.

Egorov also borrowed $17 million in the FRAX stablecoin, using $32 million in CRV as collateral to stablecoin issuer Fraxlend. In the past few hours, Egorov made several transactions to repay some of the funds he borrowed on Fraxlend through DeBank. He also secured an $18 million loan on the decentralized platform Abracadabra.

According to Etherscan, Egorov has been backing up funds by selling LDO — the governance token of liquidity staking leader Lido — in tranches for between $10,000 and $50,000 in exchange for Circle’s USDC stablecoin.

**Whether or not Egorov's CRV borrow position was liquidated, the situation has raised questions in crypto investing circles about how one individual could lend out so much of the supply of "blue chip" crypto tokens. **

It also raises questions about decentralized lending protocols like Aave, and whether they should implement safeguards to limit large positions like Egorov that could introduce systemic risk.

According to Coinglass, CRV saw $3.03 million in liquidations over the past 24 hours, trailing BTC and ETH.