In a move to address the precarious debt situation on decentralized exchange Curve Finance, Tron blockchain founder Justin Sun has purchased 5 million Curve tokens (CRV) from an address labeled "Curve.fi Founder." Sun acquired the tokens through an over-the- counter transaction, paying around $2 million in Tether (USDT) at an average price of $0.4. This acquisition happened at a price lower than the current trading value of $0.59 per token, as reported by blockchain analytics platform Lookonchain.
Sun revealed on Twitter that he and Curve Finance founder Michael Egorov are collaborating to introduce a stUSDT pool on the decentralized exchange. This initiative aims to enhance user benefits and provide support to the platform. Sun emphasized their joint commitment to empowering the comm unity and building decentralized finance solutions.
The context for Sun's acquisition of CRV is the concern surrounding the potential collapse of the DeFi ecosystem due to the liquidation of Egorov's $100 million loan. These concerns escalated following a breach on July 30, when several Curve Finance pools using Vyper , Ethereum's smart contract programming language, were exploited in a reentrancy attack. This breach caused the value of CRV to drop significantly, putting the liquidation of Egorov's loans in different lending protocols at risk.
Egorov had collateralized his loans with 47% of the circulating CRV tokens, amounting to 427.5 million tokens. He borrowed 63.2 million USDT on Aave and staked $305 million worth of CRV as collateral. Additionally, he provided 59 million CRV to Frax Finance as collateral against a 15.8 million FRAX debt. Delphi Digital, a cryptocurrency research firm, highlighted the risk involved in Egorov's loans. While his Aave loan has a liquidation threshold of 55%, meaning liquidation could occur if CRV drops to $0.37 , the Frax debt, with a time-weighted variable interest rate, poses greater risk.
In response to the situation, Egorov took action by deploying a new Curve pool for the CRV/FRAX marketplace of FraxLend. This deployment offers 100,000 CRV rewards to mitigate the risk of spiraling debt.
