The dark side of DeFi

[knowngunman]

X

As seen in the image above, a trader lost $50 million in less than a minute. Yes, you read that right, $50 million just gone and can not be reversed.

Imagine swapping $50 million for 324 AAVE tokens that worth just $36,000. That's what happened here. The victim used a DeFi app to performed the said transaction. Although, a warning pop up notifying the user of a high slippage but the victim still proceed to confirm the transaction and it's gone. This is not a hack case, neither a scam but just the way the system is designed to function.

One more reason why some people find it difficult to get into crypto. This is not like a bank where you can contact customer care for assistance and expect refund.

AAVE team offered to compensate the victim with $600, 000 from the transaction fee but this change nothing considering the amount lost.

As a trader, you have to be aware that every step requires your utmost attention. Every warning must be carefully studied to know whether to proceed or cancel. I believe this mistake could be avoided if he'd pay attention to the warning.

[Charles-Tim]

Although similar topic is existing already but not well explained like you explain it: https://bitcointalk.org/index.php?topic=5577240.msg66503107#msg66503107.

That is one thing I do not like about some exchanges, how would they design an exchange that will take so much from people in a way that the money can not be recovered.

Some people can still make mistake like this.

Best is to lock this thread. Also it belongs to altcoins board not trading discussion board.

[cryptoaddictchie]

Imagine swapping $50 million for 324 AAVE tokens that worth just $36,000. That's what happened here. The victim used a DeFi app to performed the said transaction. Although, a warning pop up notifying the user of a high slippage but the victim still proceed to confirm the transaction and it's gone. This is not a hack case, neither a scam but just the way the system is designed to function.

Since the app put a warning for the transaction its the user fault to miss the details. Thats how non custodial dex works. If the liquidity isnt enough for a pool it doesnt mean you can get the enough balance when swapped.

Just wondering with this trade should the price of AAVE does pump more? Since its probably concentrated pool whoch doesnt much have tokens for that huge amount.

The user must have use cex for this big amount to swapped on. Im guessing his a defi maxi, trying to do some retro for an airdrop but since there is no liq on their pool its got rekt badly.  Do you know the name of the app?

[slaman29]

What is the guy doing using an wallet that has $50M to just swap like this haha. I would be cold storaging that all the time.

How does someone who has that much USDT have so little regard for how slippage works, while using a lesser known protocol too.

Just like that, indeed. Self custody not for everyone.

The user must have use cex for this big amount to swapped on. Im guessing his a defi maxi, trying to do some retro for an airdrop but since there is no liq on their pool its got rekt badly.

How do you mean? A CEX tx doesn't even happen on chain. And a Defi maxi doesn't use a cex

[cryptoaddictchie]

How do you mean? A CEX tx doesn't even happen on chain. And a Defi maxi doesn't use a cex

That $50m worth of stablecoins can be swapped easily via cex like Binance getting all the aave tokens he need. Precisely, my thought since he is using a protocol on dexes means he probably trying to trigger something here related to defi as it works sometime as retro for some airdrops to be eligible but for this big I guess its too much funds just to interact for an airdrop. Maybe chances that he is absent minded when doing this or realize it but already clicked it and kaboom. Gone. But honestly I dont mnow the goal of the trader with that huge funds, might not be for an airdrop but something else. I will look around whats the cause of this. Ciao.

[FinneysTrueVision]

Some people are speculating that it might be Garret Bullish who made the mistake based on onchain evidence.
https://www.binance.com/en/square/post/300990383699281

The error happened when they were doing a collateral swap on Aave. It’s very strange that they would want to swap their collateral from a stable, highly liquid asset to a volatile, illiquid token.

[Zaguru12]

That $50m worth of stablecoins can be swapped easily via cex like Binance getting all the aave tokens he need. Precisely, my thought since he is using a protocol on dexes means he probably trying to trigger something here related to defi as it works sometime as retro for some airdrops to be eligible but for this big I guess its too much funds just to interact for an airdrop. Maybe chances that he is absent minded when doing this or realize it but already clicked it and kaboom. Gone. But honestly I dont mnow the goal of the trader with that huge funds, might not be for an airdrop but something else. I will look around whats the cause of this. Ciao.

The situation is would have been much better with centralized exchanges because of liquidity but the question still remains that such exchange must be a very reputable exchange because the coin swapping to in question is actually not a coin which its liquidity can be that high in exchange. I am very much adamant that even centralized exchanges will not be able to have such amount of that coin at such a goal because.

The only advantage that the centralized exchanges will have is simply be that the interaction isn’t with a protocol we know the centralized exchanges are actually more of Manual and not real swaps at first so the risk will be minimized because might just actually approved the swaps and go for liquidity elsewhere to add and then complete the swaps. But the most important thing or best way to swap to such coins for such a high amount is to them in batches because they will seriously be having poor liquidity on the exchanges for that shiity coin

[Fivestar4everMVP]

That $50m worth of stablecoins can be swapped easily via cex like Binance getting all the aave tokens he need. Precisely, my thought since he is using a protocol on dexes means he probably trying to trigger something here related to defi as it works sometime as retro for some airdrops to be eligible but for this big I guess its too much funds just to interact for an airdrop. Maybe chances that he is absent minded when doing this or realize it but already clicked it and kaboom. Gone. But honestly I dont mnow the goal of the trader with that huge funds, might not be for an airdrop but something else. I will look around whats the cause of this. Ciao.

The situation is would have been much better with centralized exchanges because of liquidity but the question still remains that such exchange must be a very reputable exchange because the coin swapping to in question is actually not a coin which its liquidity can be that high in exchange. I am very much adamant that even centralized exchanges will not be able to have such amount of that coin at such a goal because.

The only advantage that the centralized exchanges will have is simply be that the interaction isn’t with a protocol we know the centralized exchanges are actually more of Manual and not real swaps at first so the risk will be minimized because might just actually approved the swaps and go for liquidity elsewhere to add and then complete the swaps. But the most important thing or best way to swap to such coins for such a high amount is to them in batches because they will seriously be having poor liquidity on the exchanges for that shiity coin

Well, Aave is not really a shifty coin, a coin worth over $100 is not shitty, the value shows that there's real tech behind the coin and a possible use case too..
But then Aave itself isn't what we are discussing, it's the mistake made by the investor, one I find very brutal if actually this was an honest mistake..

I agree that the best way or strategy the investor would have used is to buy the token in batches, and whether he used a centralized exchange for the purchase, buying in batches would have still been the best strategy to completely minimize the risk..

But like I did mention on the other forum on this same discussion, I've been following this on X and so far, many people are saying that the victim didn't make any mistake, that what happened was actually what he intended to happen, some presumably believe that the $50 million dollars isn't a clean money and what the investor did was possibly his best way of laundering the money, don't know how possibly true this is or can be, but I know in this situation, we have to look at it from all sides, but one good lesson that is standing out here is that we should never ignore warning when dealing with money matters online.

[JeffBrad12]

Some people are speculating that it might be Garret Bullish who made the mistake based on onchain evidence.
https://www.binance.com/en/square/post/300990383699281

The error happened when they were doing a collateral swap on Aave. It’s very strange that they would want to swap their collateral from a stable, highly liquid asset to a volatile, illiquid token.

Maybe he wants to vote on governance and got rekt in the process.

I'm sweating my balls swapping $5k let alone 50 million because of this exact reason, can't trust my money to be in the hands of some random address even for 5 seconds.

[knowngunman]

Also it belongs to altcoins board not trading discussion board.

I think trading discussion is the perfect board for this discussion. I thought about posting it in altcoins discussion too but this is not just about the altcoin that's involved, it's more about the mistakes some traders make and lose their money. So I think it worth to be here.

Do you know the name of the app?

It's not external app, the victim performed the transaction through the official AAVE interface. AAVE have their own app for swapping and managing other positions on their token. There is also a Web version of their protocol for similar purposes. AAVE team confirmed the incident and offered to refund about $600k even though they argued that the interface showed the victim multiple warnings about extraordinary slippage that include checking on a box but the victim proceed with the transaction anyway.

But like I did mention on the other forum on this same discussion, I've been following this on X and so far, many people are saying that the victim didn't make any mistake, that what happened was actually what he intended to happen, some presumably believe that the $50 million dollars isn't a clean money and what the investor did was possibly his best way of laundering the money, don't know how possibly true this is or can be, but I know in this situation, we have to look at it from all sides, but one good lesson that is standing out here is that we should never ignore warning when dealing with money matters online.

If this assumption is true, then this should be included among the most stupidiest way to launder money. I rather get caught red handed with the full amount than losing that huge part in the laundering process. That's never a smart move at.

[Zaguru12]

Well, Aave is not really a shifty coin, a coin worth over $100 is not shitty, the value shows that there's real tech behind the coin and a possible use case too..
But then Aave itself isn't what we are discussing, it's the mistake made by the investor, one I find very brutal if actually this was an honest mistake..

Ok I might have actually been too hard calling a shit coin but seriously I don’t actually rate most of this coins so high except they among the few five Altcoins with their respective network. Yes AAVE is actually just another lending and borrowing platform on Ethereum network like the many we have had already. So $50 million going there is such a huge mess. Plus I don’t rate coins based on their market price, higher price sometimes doesn’t mean good coins

But like I did mention on the other forum on this same discussion, I've been following this on X and so far, many people are saying that the victim didn't make any mistake, that what happened was actually what he intended to happen, some presumably believe that the $50 million dollars isn't a clean money and what the investor did was possibly his best way of laundering the money, don't know how possibly true this is or can be, but I know in this situation, we have to look at it from all sides, but one good lesson that is standing out here is that we should never ignore warning when dealing with money matters online.

I definitely agree with you that this was an intentional thing, because with such amount of money the person is seriously expected to be extra cautious and DeFi will be his last resort if actually there was nothing to hide. For me I also thing he is avoiding some exchanges and using exploit of decentralized exchanges to help him hide anything he is trying to hide. At least he got almost a $700k back maybe that was the intention itself

[Bitcoin_Arena]

Those of us who remember the good/bad old days of Etherdelta will look at this case and wonder how dumb that person was to that point. Etherdelta even gave no warning but i guess it taught some of us how to be extra careful when placing orders

This is not a hack case, neither a scam but just the way the system is designed to function.

Not a design, though. That is just simple logic of the order book and market depth.

One more reason why some people find it difficult to get into crypto. This is not like a bank where you can contact customer care for assistance and expect refund.

Once you get into crypto. Your money is your responsibility, and it's better to start with small amounts you can afford to lose. This is like one of the first commandments one comes across as a newbie when getting into crypto.

[slaman29]

How do you mean? A CEX tx doesn't even happen on chain. And a Defi maxi doesn't use a cex

That $50m worth of stablecoins can be swapped easily via cex like Binance getting all the aave tokens he need. Precisely, my thought since he is using a protocol on dexes means he probably trying to trigger something here related to defi as it works sometime as retro for some airdrops to be eligible but for this big I guess its too much funds just to interact for an airdrop. Maybe chances that he is absent minded when doing this or realize it but already clicked it and kaboom. Gone. But honestly I dont mnow the goal of the trader with that huge funds, might not be for an airdrop but something else. I will look around whats the cause of this. Ciao.

Yeah, cex like Binance is orderbooks, none of those trades happen on chain, only deposits and withdrawals.

OP shows a whole onchain transaction, and the slippage causing it is only possible on a DEX.

I really don't think it was for an airdrop, doesn't make sense. Just a plan simple mistake, but I'm just wondering why he didn't go for a bigger LP.

[cryptoaddictchie]

The situation is would have been much better with centralized exchanges because of liquidity but the question still remains that such exchange must be a very reputable exchange because the coin swapping to in question is actually not a coin which its liquidity can be that high in exchange.

Thats right, however I find it recrntly how this issue happened through a delicate kol who explained the csse of this mistake. Zun a very sophisticated developer explained  what happened how the $50m gone wrong

His probably a big player based on his address_{(Some mentioned his name on X)}

It's not external app, the victim performed the transaction through the official AAVE interface. AAVE have their own app for swapping and managing other positions on their token. There is also a Web version of their protocol for similar purposes. AAVE team confirmed the incident and offered to refund about $600k even though they argued that the interface showed the victim multiple warnings about extraordinary slippage that include checking on a box but the victim proceed with the transaction anyway.

Yes I just recently read his case through Zun as he mentioned what the user intended to do but gone wrong.

Quoted from Zun article according to him:

Code:

What the trader was trying to do
The trader was using Aave's collateral swap feature. If you are not familiar, it lets you swap one deposited asset for another without withdrawing first. It is like exchanging your USD savings for EUR savings at the same bank without pulling cash out.
The trader wanted to go from aEthUSDT (their Tether sitting in Aave) to aEthAAVE (AAVE tokens sitting in Aave).

Some really thought he got scam or frontrun by mevs but he likely did a mistake on accepting the transactions with all AAVE warning
 Every protocol seems to did their work as intended however the user overlook whats so simple here hence resulting to a bigger loss.

[Zaguru12]

Thats right, however I find it recrntly how this issue happened through a delicate kol who explained the csse of this mistake. Zun a very sophisticated developer explained  what happened how the $50m gone wrong

His probably a big player based on his address_{(Some mentioned his name on X)}

What Zun rightly explained was what anyone who actually understands DeFi will definitely understand, for me it was either a costly mistake by OP or he was actually trying to get a way from something. There is no way all the warnings wouldn’t be there, the slippage might be low but once you’re taking almost all of that pools funds or some quarter of it you will see the quote of what you will get in return, some will even show the total amount you will lose. I have been a victim in the past of this situation before where the quote was actually showing me just 50% of my total amount as the amount I will receive.

Most probably the victim simply said ignored the warning or doesn’t know the worth of 376 AAVE then the usdt value would most definitely have actually been in parentheses besides it. Personally I think the founder returning such fees was even generous in my opinion