Curve Founder’s $168M Stash Is Under Stress, Creating a Risk for DeFi as a Whole

Chaos at Curve Finance has put a $168 million lending position held by founder Michael Egorov at greater risk of liquidation, an event that – if it happens – could have giant implications across decentralized finance (DeFi).

Egorov has $168 million of CRV – Curve’s native token – securing loans from multiple DeFi protocols, data on blockchain analytics site DeBank shows. That equals almost 34% of the token’s total market capitalization.

Following an exploit over the weekend at Curve, CRV’s price has sunk more than 20%, putting Egorov closer to levels where he’d get liquidated.

A forced liquidation would be another serious blow to Curve, a key piece of infrastructure in the DeFi economy. The protocol suffered a major exploit that siphoned some $70 million of assets away from users. The total value of assets locked on Curve dropped to $2.1 billion from $3.7 billion as many investors withdrew funds as a precaution.

If Egorov’s loans are liquidated, the lending protocols will have to sell the seized assets, inundating the market with CRV tokens at a time when prices were already spiraling lower.

He locked up some $168 million in CRV tokens on the lending platform Aave to take out a $63 million loan in Tether’s USDT stablecoin. According to DefiLlama, the level Egorov’s CRV collateral gets liquidated is 37 cents; CRV currently trades for around 55 cents.

Egorov and Stani Kulechov, founder of Aave, did not respond to a request to comment by press time.

Egorov also borrowed $17 million of FRAX stablecoin using $32 million of CRV as collateral on stablecoin issuer, Fraxlend. In the past couple of hours, Egorov has made several transactions to repay some of the capital he borrowed on Fraxlend, per DeBank. He also has a $18 million loan on decentralized platform Abracadabra.

Egorov has been shoring up capital this afternoon by selling LDO -– the governance token for liquid staking leader Lido – for Circle’s USDC stablecoin in several batches between $10,000 and $50,000, according to Etherscan.

Whether or not Egorov’s CRV borrow position is liquidated, the situation has already raised questions in crypto investing circles around how a single person was able to lend so much of a “blue chip” crypto token’s supply.

It’s also raised questions for decentralized lending protocols like Aave, and whether they should implement safeguards to limit large positions like Egorov’s that have the potential to introduce systemic risk.

According to data from Coinglass, CRV has had $3.03 million in total liquidations in the past 24 hours, trailing behind BTC and ETH.