DEFI

Curve founder collateralizes 33% of CRV circulating supply, borrows significant amount of stablecoins from Aave, potentially triggering a crisis with incentivized shorting.

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Curve founder collateralizes 33% of CRV circulating supply, borrows significant amount of stablecoins from Aave, potentially triggering a crisis with incentivized shorting.

Last week, Curve founder Michael Egorov Michwill faced a controversy with early investors, and on June 10th, Michwill stirred up further controversy. Online analysis account Lookonchain discovered that Michwill had deposited a large amount of CRV, totaling around 290 million tokens, into the lending protocol Aave, and borrowed 71 million stablecoins. dForce founder Yang Mindao speculated that this could be a case of "enticement for short selling."

Recalling the negative news about Curve: The founder of Curve was sued by major investors for fraud and using investor funds to mine CRV tokens.

Curve Long-Term Mortgages a Large Amount of CRV to Borrow Stablecoins, Needs to Add Collateral When CRV Drops

Lookonchain believes that on the afternoon of June 10th, the wallet address of Michwill, the founder of Curve, was found to have deposited a large amount of CRV into the lending protocol Aave. This was likely due to a significant drop in CRV, necessitating the addition of collateral to maintain the health factor of the loan. At that time, a total of 290 million CRV had been accumulated in the protocol, accounting for 33% of the total circulation.

According to Binance data, the CRV fell nearly 13% around noon on June 10th.

The time when Curve's founder deposited CRV was at 3:39 PM on June 10th, after a significant drop, possibly to supplement collateral assets:

Inducing Short Selling Arbitrage? Risky Behavior in Bear Market

Yang Mindao, the founder of dForce, believes that Curve's founder, Michwill, has successively deposited 33% of the circulating supply of CRV into Aave, using its own tokens as leverage. While it may appear to be a reluctant sale, it is actually an inducement for short selling. Media speculation suggests that Yang Mindao may be referring to the strategy of creating liquidity scarcity to attract buyers and then dumping assets by large holders.

Yang Mindao, the founder of dForce, stated that this poses a significant risk to the Curve ecosystem and Aave. As the market declines and liquidity shrinks significantly, the risk intensifies. Aave V2 does not set a deposit limit, leading to uncontrolled collateral exposure, with the only option being to increase the cost of borrowing USDT.

Curve also made repayments on June 10th:

  • Collateralized 277,275,759 CRV in Aave, accounting for approximately 32.5% of the circulation with a borrowing health factor of 1.72
  • Already borrowed 64,237,259 USDT

In the past, CRV has been targeted, and the attacker was eventually short squeezed, leaving Aave with a debt of approximately $1.6 million.