Nov 23, 2022 Frank Stewskid
A failed attempt at manipulating CRV price on Aave leaves the exploiter with around $8 million loss
After successfully exploiting Mango Markets for $114 million through market manipulation, notorious crypto trader – Avraham Eisenberg tried to do the same to Aave but failed, losing about 17 million CRV tokens in the process. According to various blockchain researchers, the trader had started building up a short position on CRV on November 14, by borrowing CRV on Aave in an attempt to affect the CRV token price negatively and profit from the short position.
🚨Wow, conman @avi_eisen has a 17m $CRV short position.— DefiMoon 🦇🔊 (@DefiMoon) November 20, 2022
Avi started shorting on Nov. 14 by borrowing CRV on AAVE via the @FortressDAO multisig addy, which he controls: https://t.co/2rts8QfAUPhttps://t.co/lv13QvlVhW#DeFi pic.twitter.com/MLmwamgTKG
Weeks ago Avraham Eisenberg had shared his plan to manipulate Aave, through a loophole in its lending policies, however, neither Aave nor Gauntlet – a financial platform employed by Aave to prevent such exploits, reacted.
I've been advised aave is perfectly safe so here's the potential trading strategy. Not financial or legal advice, but if you do make 9 figures on this feel free to send a tip— Avraham Eisenberg (@avi_eisen) October 19, 2022
Note that starting with more initial capital increases success odds and profit percentage pic.twitter.com/HKAF7Y5ogM
This led to the trader trying his tactic himself yesterday and failing dramatically in the process. Although CRV’s price did decline initially, changing from $0.53 to $0.41, after that it recovered and even went above its previous level, reaching $0.71 and is currently sitting at $0.62 – a 45.1% change in the last 24 hours, according to various data sources. Following the unsuccessful attempt at manipulating the CRV price, Gauntlet shared a statement on Twitter voicing the failed scheme and announcing plans to mitigate such risk in the future, through a governance proposal changing the parameters on Aave v2 ETH.
The attempt to squeeze CRV on @AaveAave has been unsuccessful and unprofitable. Despite this Aave has accrued a much smaller insolvent position— Gauntlet (@gauntletnetwork) November 22, 2022
Our immediate recommendation is to freeze a number of tail assets on v2 to mitigate the risks of similar, likely unprofitable, squeezes
Even though it seems the trader was unsuccess in profiting by the token losing its value, the initial drop in its price, as well as the later major spike in it, might have been profitable to the exploiter as they opened liquidation possibilities on Aave. Furthermore, due to the change in the digital asset’s price, Eisenberg or other Aave users were able to borrow more funds against their collateral, which seems to have happened as Gauntlet confirmed Aave is currently sitting on a 1.6$ million bad loan position in a response to a now-deleted Tweet, affirming it would be covering the losses from its insolvency refund program.