Aave [AAVE] passes proposal to clear millions in debt… Details inside
- Aave’s community recently approved a proposal to clear a bad debt of 2.7 million CRV.
- The bad debt stemmed from a failed exploit launched by Avraham Eisenberg in 2022.
DeFi lending protocol Aave [AAVE] passed a governance proposal on 25 January, which sought to eliminate excess debt in the Ethereum [ETH] v2 liquidity pool’s CRV Reserve. The bad debt stemmed from a failed exploit launched by Avraham Eisenberg, the notorious hacker behind the $116 million Mango Markets exploit.
Aave proposal approved by 100% of the community
In November 2022, Avraham Eisenberg orchestrated a scheme to exploit Aave’s Ethereum v2 liquidity pool by borrowing millions of Curve Dao [CRV] tokens in order to force a short squeeze. Through the squeeze, the positions held by the platform’s developers.
However, due to a spike in price, Avraham’s positions were liquidated. This left him with a loss of $10 million and a bad debt of 2.7 million CRV for Aave.
To clear this debt, the integration lead at Aave, Marc Zeller, proposed to purchase the CRV tokens in December 2022. After a positive response from the forum, the proposal moved to the voting stage. Notably, 100% of the community voted in its favor.
The developors deployed a swap contract to purchase the required CRV. The contract’s budget had a cap of $3.1 million, with a maximum price of $1.15 per CRV. The contract exchanged aUSDC from its massive holding of 5.2 million aUSDC in the Ethereum collector contract.
Governance proposals inspired by Eisenberg
Interestingly, the exploit by Avraham Eisenberg had inspired another governance proposal. The proposal was made last year within a day of the attempted exploit.
On 23 November 2022, a proposal seeking to make parameter changes on Aave V2 ETH was posted on the governance forum. It would essentially decommission the protocol’s low liquidity asset pools, such as CRV and Decentraland [MANA].
Unsurprisingly, the community passed this proposal with an overwhelming majority as well.