Revisiting the story of Curve founder’s $141 million CRV being liquidated

On the evening of June 13, Arkham posted that Curve founder Michael Egorov's nearly nine-digit loan positions (141 million US dollars CRV) had been completely liquidated, and a total of more than 1 million US dollars in bad debts were generated on Curve's lending platform Llamalend.

In response to this liquidation storm, Curve founder Michael Egorov posted on social media that day that the Curve team and I have been working hard to solve the liquidation risk problem today. As the public knows, all my loan positions have been liquidated.

He also added that due to the large size of his holdings and the excessive impact on the market, it has caused about 10 million US dollars in bad debts, but 93% has been repaid so far, and the remaining bad debts will be repaid soon.

So far, the 12-hour liquidation storm seems to have been paused, and the CRV coin price has remained at $0.28.

However, the reasons for the large-scale liquidation of CRV lending positions are still worth further investigation, and the founder Michael Egorov's indifference to the liquidation and his calm behavior of "no replenishment and no rescue" are even more surprising, so that the community questioned whether he was selling CRV to cash out through mortgage loans?

141 million US dollars of CRV liquidation may be expected

As early as two months ago, the founder Michael Egorov's CRV position on the lending platform was warned of potential liquidation risks, but Michael Egorov did not take any action, neither replenishing the position nor returning the borrowed stablecoin assets. When CRV was liquidated this time, it was not surprising, and it seemed to have been expected.

On the morning of June 13, the data platform Arkham issued a reminder that Curve founder Michael Egorov's positions on five lending platforms, which were mortgaged with $141 million of CRV and lent out $9,570 of stablecoins (mainly crvUSD), will face the risk of being liquidated as the CRV token falls.

Arkham pointed out that if the price of CRV falls by about 10% again, Michael Egorov's positions are likely to begin to be liquidated.

Subsequently, the CRV token plunged from $0.35 to a low of $0.21, with a daily decline of more than 40% at one point, setting a new historical low.

Michael Egorov's CRV lending positions on multiple lending platforms such as Inverse and UwU Lend all fell below the liquidation line and entered liquidation mode.

On the evening of June 13, Arkham issued a statement saying that the $141 million (worth about 9 digits) lending position on Michael Egorov's address had been fully liquidated.

In fact, as early as two months ago, Michael Egorov's CRV mortgage lending position was prompted to have entered the danger zone and faced the possibility of being liquidated.

On April 14, Yu Jin, a chain data analyst, posted on social media that as the market fell, the price of CRV also fell to $0.42, and Michael Egorov's lending position also entered the red line danger zone again.

According to monitoring, Michael used 5 addresses to pledge a total of 371 million CRVs on 6 lending platforms including Curve LlamaLend, UwU Lend, Silo and FraxLend, and borrowed $92.54 million in stablecoins, with a total of 12 debts. Among them, the lending health rate of multiple positions has dropped to around 1.1. According to speculation, if the price of CRV continues to fall by 10% without replenishment or repayment, liquidation will be initiated.

At night, the CRV price fell to $0.35, and had already fallen below 10% of $0.42, but strangely, Michael Egorov's loan position was not liquidated, and he did not seem to take any remedial measures.

There are two views on why it was not liquidated. One is that the oracle price lags behind and may not track the liquidation price; the other is that the liquidation mechanism of the lending platform Silo is manual liquidation, not automatic liquidation. Even if the price reaches the liquidation line, if it is not manually executed, the liquidation does not really happen.

Michael Egorov seems to have been lucky enough to avoid the liquidation in April, and his position was not threatened.

However, facing his precarious position, he did not take any countermeasures in the past two months. So when the price of CRV fell again with the overall decline of the crypto market, the liquidation of Michael Egorov's CRV loan position was expected.

Michael Egorovwas suspected of selling CRV through lending

Faced with this large-scale position liquidation of CRV, the performance of the founder Michael Egorov was even more surprising. He did not say anything during the entire liquidation process, and was even indifferent. He did not take the initiative to cover his position or take any remedial actions. On the morning of June 13, when the position liquidation occurred, he joked with users in the Frax Finance community, saying that his mental state was very healthy.

During the CRV liquidation crisis in August last year, Michael Egorov took the initiative to cover his position and sold 159.4 million CRV to 33 investors or institutions in OTC transactions in exchange for 63.76 million stablecoins to repay his loans and save his positions in order to avoid liquidation caused by the decline in CRV prices.

Compared with the last time when he quickly returned part of the funds on various lending platforms and increased the status of CRV collateral, Michael Egorov was unusually calm in the face of the liquidation of the $141 million CRV position. He neither actively sold CRV on OTC to repay the loan nor transferred part of the previously borrowed stablecoins back to repay the loan. He was unusually calm.

Some users questioned whether this liquidation was a long-planned cash-out method by Michael Egorov. Liquidating $141 million of CRV positions, he eventually obtained about $100 million in stablecoins, and as the price of CRV fell, the loss seemed to be less than 30%. If he dumped $141 million of CRV directly into the secondary market, with the current liquidity of CRV, the loss might be more than 30%, and he would also be accused of dumping the market.

Regarding the liquidation of CRV positions, Ethereum core developer eric.eth said that the founder of Curve did not suffer "losses" from the liquidation of CRV. He earned $100 million from a CRV position worth $140 million, and selling it on the market would result in similar prices and cause dissatisfaction in the community.

User @0x_Kun said in a comment that if $140 million worth of CRV is sold on the secondary market, there will be crazy slippage. Michael Egorov used collateral to obtain US dollar stablecoins. Although the liquidation lost about 30% of the collateral, he finally obtained $100 million.

He added that collateral liquidation is a win-win cash-out strategy for Michael Egorov. If the price of CRV rises, he only needs to borrow more money. If the price falls, it will be liquidated, but all the borrowed money can be retained.

Youtube blogger @sassal.eth commented with "You didn't have to buy a mansion", mocking Michael Egorov's position liquidation behavior this time as no different from the previous cashing out of VC coins to buy a mansion.

CRVLiquidation Aftermath: Investors Suffer

Whether this CRV liquidation was a premeditated sell-off or an unintentional act, the impact of the liquidation of hundreds of millions of dollars on the crypto market cannot be underestimated, especially the investors related to Curve, which has affected multiple lending platforms.

Among them, the plunge in CRV prices also triggered the liquidation of positions on other lending platforms. According to Lookonchain data, a user had 10.58 million CRV liquidated on Fraxlend, worth $3.3 million.

In addition, all OGs, institutions and VCs who participated in the "Curve Defense War" last year, such as DWF and Huang Licheng, who bought CRV tokens at $0.4 in the OTC market, are in a loss state as CRV falls to a historical low.

Of course, in the face of this liquidation storm, some people also supported and profited. For example, Christian, co-founder of the crypto fund NDV and NFT giant, said that he received 30 million CRV from Michael Egorov to support the future of Curve and DeFi. It is reported that Christian bought about 6 million US dollars of CRV off-market, that is, the price of each CRV token was 0.2 US dollars. According to the current price of 0.28 US dollars, the book profit is about 40%.

Since the founder of Curve was jointly attacked by VC institutions in March last year and occupied VC coins, and cashed out to buy luxury houses, the crisis of the Curve platform has been one after another. It was attacked by hackers in July of the same year, and was prompted to liquidate risks in April this year. Now 141 million US dollars of CRV positions have been liquidated, and so on.

Curve, once the top two blockbuster products of DeFi, has been on the decline. Some people attribute it to the development difficulties of the DeFi track, but more people think that Curve is a good hand that was played badly by Michael.

According to DeFiLlama data, on June 14, the TVL of Curve platform has dropped to 2.27 billion US dollars. Compared with the high of 2022, the TVL has shrunk to less than one-tenth of the original, and its ranking in the DeFi market has also dropped to outside the top 15.