The Monday exploit of UwU Lend resulted in a series of events that led to Michael Egorov's $100 million loans from various protocols being automatically liquidated, causing the CRV token to drop by up to 30%.
Despite the bad debt and liquidations, Egorov said he remains committed to ensuring that all users can withdraw their deposits and is focused on making Curve Finance's lending/borrowing products the safest in the industry.
The exploit of UwU Lend on Monday put in motion a series of events that led to Thursday’s multimillion liquidations on DeFi lending giant Curve, representatives for its founder Michael Egorov told CoinDesk over Telegram messages on Friday.
Egorov’s $100 million in loans taken from various protocols using Curve’s CRV tokens started to automatically liquidate on Thursday, sending the token down as much as 30% before it briefly recovered.
The catalyst for the bad debt and liquidations has been traced back to UwU Lend, a crypto protocol that allows users to burrow, lend, and stake tokens.
“On April 15 they (UwU Lend) deployed vulnerable code for new (sUSDe) markets, and those markets are not isolated, so the whole platform takes the risk,” Egorov said. “UwU was hacked, and the hacker, as a part of cash-out play, deposited CRVs taken from UwU to lend.curve.fi (LlamaLend) and disappeared with the funds, leaving his debt in the system.”
UwU Lend lost $20 million on Monday after being hit by a flash loan attack and another $3.7 million on Thursday in a separate attack. As of Friday, it is offering a bounty reward of $5 million to catch the attackers.
In an X post, Egorov estimated bad debt in a particular CRV lending pool at $10 million. While this market is fully isolated from other lending pools, depositors in the CRV could not withdraw their funds as long as the bad debt existed.
The Curve Finance team and I have been working to solve the liquidation risk issue which happened today. Many of you are aware that I had all my loans liquidated. Size of my positions was too large for markets to handle and caused 10M of bad debt. Only CRV market on…
— Michael Egorov (@newmichwill) June 13, 2024
However, Egorov said that the situation could help bolster Curve’s security measures and loan mechanisms and could create a better service for users in the coming months.
“Yesterday the system was tested in unthinkable conditions,” Egorov said. “We have a lot to process, but most importantly we have all the information on how to make the safest and the most resilient lending/borrowing ever existed.”
“I am dedicated to ensuring that all users can withdraw their deposits without any hassle. I always think that Curve Finance is my priority, and the most important is our community,” he added.
Curve is among the largest crypto protocols with over $2 billion in locked assets as of Friday, DefiLlama data shows.