• Aave recently approved a proposal to clear a bad debt of 2.7 million CRV stemming from a failed exploit launched by Avraham Eisenberg in 2022.
• The proposal was voted in favor by 100% of the community and a swap contract was deployed to purchase the CRV tokens with a cap of $3.1 million.
• The exploit by Avraham Eisenberg had inspired another governance proposal made last year within a day of the attempted exploit.
On the 25th of January, the DeFi lending protocol Aave [AAVE] made history by passing a governance proposal that sought to eliminate excess debt in its Ethereum [ETH] v2 liquidity pool’s CRV Reserve. The proposal, which was voted in favor by 100% of the community, was made to clear a bad debt of 2.7 million CRV that had been brought on by the notorious hacker Avraham Eisenberg.
The story began in November 2022, when 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 this squeeze, the positions held by the platform’s developers were liquidated. Unfortunately for Avraham, a price spike caused his positions to be liquidated, resulting in a loss of $10 million and a bad debt of 2.7 million CRV for Aave.
In response to this situation, 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 and was approved unanimously by the community.
To purchase the required CRV tokens, the developers deployed a swap contract with a budget cap of $3.1 million and 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.
Interestingly, the exploit by Avraham Eisenberg had inspired another governance proposal. On 23 November 2022, a proposal seeking to make parameter changes on Aave V2 ETH was posted on the governance forum. It would essentially add additional lines of defense against exploits such as Avraham’s. This proposal was also voted in favor unanimously by the community.
Thanks to the swift action of the Aave community and its developers, the bad debt stemming from Avraham Eisenberg’s failed exploit was cleared. This serves as a testament to the power of decentralized governance, as well as the importance of having strong lines of defense against malicious actors.