- A trader lost nearly $50 million on Thursday after swapping that amount of USDT for just 324 AAVE tokens through the Aave protocol’s interface.
- The user confirmed an “extraordinary slippage” warning before the trade, which had a 99% price impact due to low liquidity for such a large order.
- Aave founder Stani Kulechov stated the protocol will attempt to return about $600,000 in fees from the transaction to the trader.
- The trade was routed through CoW Swap and functioned as designed, highlighting a need for stronger user safeguards in DeFi.
A crypto trader suffered a catastrophic loss of nearly $50 million on Thursday after executing a massive swap for Aave‘s governance token through the protocol’s own decentralized trading interface. The user attempted to buy AAVE with $50 million in USDT, but received only 324 tokens worth roughly $36,100.
Aave founder Stani Kulechov confirmed the incident in a statement on X. The interface issued a clear warning flagging “extraordinary slippage,” which the trader manually confirmed on a mobile device before proceeding.
Consequently, the trade encountered a 99% price impact, not merely slippage, as explained by Aave engineer Martin Grabina. He noted the initial quote already showed the disastrous rate of $50 million for fewer than 140 AAVE, as visible on the CoW explorer. Kulechov said the team will attempt to contact the trader and return approximately $600,000 in fees generated.
However, Kulechov emphasized the trade, routed through CoW Swap, functioned exactly as designed. “The transaction could not be moved forward without the user explicitly accepting the risk,” he wrote. The incident underscores how large trades can cause severe price impact when liquidity is insufficient.
Meanwhile, Kulechov stated “Our team will be investigating ways to improve these safeguards going forward.” This event occurs as Aave’s user activity hits record highs, raising questions about balancing user protection with permissionless access in DeFi.
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