DEFI

Founder of Curve borrows over $100 million, collateralized with CRV and withdraws large amounts

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Founder of Curve borrows over $100 million, collateralized with CRV and withdraws large amounts

According to the investigation by the de-anonymized blockchain platform Arkham, Curve founder Michael Egorov has used CRV as collateral in four different DeFi protocols to borrow over $100 million in stablecoins. This substantial borrowing activity has caused the on-chain liquidity of CRV to be less than $50 million, with the total circulating market value of CRV being approximately $520 million, leading to concerns within the crypto community about the risk of liquidation.

Curve Founder Pledges Over $100 Million in CRV, Borrows $100 Million in Stablecoins

Curve founder Michael Egorov's significant collateralization has been ongoing for some time and drew attention from interested parties looking to short CRV back in November last year, aiming to trigger liquidation, but their efforts were unsuccessful.

Since then, Egorov's collateralization has only increased, continuously leveraging a large amount of assets by pledging CRV. With the unlocking of Curve team's CRV tokens this year, his borrowing volume has also grown.

As of 6/15, Egorov's positions in various DeFi protocols are as follows:

  1. Aave: Collateralized $170 million in CRV, borrowed $62 million in USDT
  2. Abracadabra: Collateralized $46.9 million in CRV, borrowed $20.5 million in MIM
  3. Fraxlend: Collateralized $27.5 million in CRV, borrowed $12.6 million in FRAX
  4. Inverse Finance: Collateralized $15.7 million in CRV, borrowed $6.9 million in DOLA

Egorov has collateralized a total of $260 million in CRV and borrowed $102 million in stablecoins.

Arkham noted that these protocols are essentially all platforms that accept CRV as collateral, and thanks to Egorov's significant collateralization, except for Inverse Finance, the other three protocols are currently among the top six holders of CRV.

After completing the borrowing process, Egorov will begin his withdrawal process, converting these stablecoins into USDT or USDC and cashing out through centralized exchanges.

Arkham's investigation found that since April this year, Egorov has transferred $32 million USDT to Bitfinex.

For reference, the largest CRV liquidity pool on-chain, Curve's CRV-ETH liquidity pool, has a total value locked (TVL) of only $44 million, with the CRV value in the pool being $21.82 million.

How Significant is the Risk Brought by Curve Founder? How to Counter it?

Regarding this phenomenon, Arkham stated that if the price of CRV continues to decline and triggers liquidation, it would not be possible to handle bad debt solely through MEV bots. Although the current lending situation remains healthy, CRV is more volatile compared to BTC and ETH.

So, in the worst-case scenario, who will be affected by the bad debt resulting from liquidation?

Arkham believes that, broadly speaking, aside from the protocols lending stablecoins to Egorov, users with assets in these protocols will also be affected.

In addition, DeFi security research firm Gauntlet recently launched a proposal on Aave's governance forum calling to freeze the CRV used as collateral and reduce the CRV loan-to-value (LTV) ratio to 0 to prevent the risk brought by Egorov from further escalating.

However, the best way to completely mitigate the risk is for Egorov to repay the loan as soon as possible to eliminate the risk posed by his large positions.