Users of the decentralized finance (DeFi) app Pac Finance have reportedly suffered $24 million in liquidations on April 11 because of a sudden parameter change made by a developer wallet, according to multiple reports on social media and the app’s official Discord server. The team’s Discord admin claims they have notified the team of the problem. However, at the time of publication, they have not yet made an announcement regarding the incident.
Pac Finance is a crypto lending app that runs on Blast network. It allows crypto holders to deposit funds and earn interest by lending their capital. To ensure repayment, the app only allows borrowers to take out loans equal to a percentage value of their collateral. This percentage is called the “loan-to-value ratio” (LTV). The LTV can be changed by the development team, but this is usually only done after an announcement is made.
According to Blast network’s blockchain data, a developer wallet called a function on Pac Finance's PoolConfigurator-Proxy contract at 1:06 am UTC on April 11, setting the LTV for Renzo Restaked Ether (ezETH) at 60%.
ezETH parameter change on Pac Finance. Source: Blastscan.
According to smart contract developer Roffet.eth, this parameter change caused “the liquidation of a large number of ezETH leveraging farmers,” as these borrowers were now found to be violating the collateral rules for the protocol. Roffet called the parameter change “arbitrary,” since it was allegedly done without warning.
Parsec Finance founder Will Sheehan also criticized the change, claiming it occurred “seemingly without warning.” Sheehan estimated that borrowers lost approximately $24 million in collateral as their assets were automatically sold off to pay back their loans due to this change.
Source: Will Sheehan.
In response to the cascade of liquidations, Pac Finance users took to the protocol’s official Discord server to complain and demand answers. In response, the team’s Discord moderator, Bountydreams, announced they were attempting to contact the team to get an explanation. By 7:55 pm, they claimed to have still received no response.
Pac Finance users complain of April 11 liquidations. Source: Pax Finance, Discord.
Mass liquidations are a frequent problem for leveraged traders who borrow cryptocurrency or cash. However, they usually happen because of sudden changes in the price of a cryptocurrency, not because of protocol changes. On April 2, leveraged Bitcoin traders were liquidated for over $165 million when it experienced a flash crash. On April 9, another $110 million in Bitcoin positions were liquidated when the price suddenly rose.
This is a developing story, and further information will be added as it becomes available.
