Aave Eliminates Bad Debt With 2.7 Million CRV Purchase 14

Aave Eliminates Bad Debt With 2.7 Million CRV Purchase

  • Aave purchased 2.7 million CRV earlier today to clear a bad debt from last year. 
  • The bad debt was the result of a failed exploit by Avraham Eisenberg. 
  • The governance vote to clear the debt saw overwhelming support from The DeFi protocol’s community. 
  • AAVE’s price has gone up more than 10% since the execution of the proposal. 

Aave has executed Aave Improvement Protocol (AIP) 144, which seeks to clear the bad debt of 2.7 million Curve DAO Tokens (CRV) on the Ethereum v2 liquidity pool. The bad debt was the result of an exploit orchestrated by Avraham Eisenberg in November 2022. Eisenberg is also responsible for exploiting Mango Markets to the tune of $117 million in October last year. 

Aave community approves the proposal with no opposition

The exploit by Avraham Eisenberg involved several high-volume short CRV positions on the DeFi lending protocol in order to liquidate the positions of developers by forcing a short squeeze. However, Eisenberg was himself liquidated after a sudden spike in price. The result was a CRV bad debt worth approximately $1.6 million at the time. 

The proposal to clear this debt was initially put forward at Aave’s governance forum last month. Following a positive response from the community, the proposal went live for voting on 22 January 2023 and saw 100% of the community in favor. The execution soon followed, which involved using the protocol’s USDC holding to acquire 2.7 million CRV. A swap contract with a cap of $3.1 million was deployed to acquire the tokens with a maximum price of $1.15 per CRV.

AAVE has seen a significant price appreciation following the execution of AIP 144. The token rose more than 10% going from $79.8 to $88.7 the following day. 

This isn’t the only governance vote that was inspired by Eisenberg’s attempted exploit. Within 24 hours of the exploit, a governance proposal was posted on the forum. The proposal sought to decommission low liquidity asset pools including CRV. It was executed following approval from the community.