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Curve Finance ‘gentleman’s agreement’ expires, counterparties dump CRV

source-logo  protos.com 06 February 2024 17:51, UTC

Last summer’s handshake deal between Curve Finance founder Michael Egorov and his on-chain bailout providers recently reached expiry. During the early hours of February 1, as soon as the deal expired, three of Egorov’s counterparties were seen to move a total of 8.75 million CRV (~$41 million at current market value).

Thrice-hacked Cream Finance sold a total of 2.5 million CRV for a modest 10% profit directly on chain, while the project’s divisive co-founder MachiBigBrother sent 3.75 million CRV to Binance, with a price drop indicating considerable sales immediately after.

Less than two hours later, a further 2.5 million CRV were sent to Binance by another wallet, labeled as ‘erwwer’ on NFT marketplace OpenSea.

First shots fired

"Questionable people/entities" are dumping on-chain and $CRV Exchange Reserves are rising@machibigbrother claimed 3.7M $CRV and sent to #Binance

Price reacted with a 10% drop@CreamdotFinance dumped 2.5M $CRV on-chain upon "unlocking" https://t.co/yeHBhUym0K pic.twitter.com/DxWoRuz9oz

— DeFi Made Here (@DeFi_Made_Here) February 1, 2024

Read more: What’s happened with Michael Egorov’s CRV?

Since the sales, made at $0.40 per CRV in August, the Curve token price has risen along with the wider crypto market. At the time of writing, CRV sits at around $0.47, representing a 17% gain for the OTC buyers who are yet to sell.

Other parties who joined Egorov’s bailout deal opted to lock CRV for veCRV, swapped for liquid wrappers of locked CRV, or simply held the original token.

The OTC deals, totaling nearly 40 million CRV, were hastily arranged due to the fallout from July’s hack of Curve Finance, in which a handful of the decentralized exchange’s liquidity pools were attacked for over $70 million. The majority of these stolen funds were later returned.

Nevertheless, the hack caused a sharp drop in the price of Curve’s token, threatening Egorov’s highly leveraged positions across a range of lending platforms. At the time, Egorov was using CRV collateral to secure loans worth over $100 million. This may well have allowed the purchase of his Melbourne mansions while avoiding the poor optics and tax consequences of selling his own project’s token.

The fact that Egorov controls a large proportion (almost 50%) of the non-locked CRV supply further compounded his predicament, as any significant sales would prove counterproductive in affecting the price of CRV, and therefore the health status of his loans.

Read more: Curve exploit shows DeFi still far from decentralized in 2023

Facing mounting pressure, including from those looking to profit from a potential liquidation cascade, Egorov sought OTC buyers willing to buy CRV in size on the condition that the funds would be held for at least six months.

However, rather than facilitating the deals via smart contracts, a widely-touted example of how ‘trustless’ crypto can replace traditional finance, Egorov chose to go with a gentleman’s agreement not to sell, which attracted a list of OTC buyers including Justin Sun, some well-known DeFi whales, and several Curve-linked projects.

Curve founder dumps CRV on Justin Sun to avoid liquidation

Is Egorov out of the woods?

Egorov’s current positions total around $50 million worth of stablecoin loans collateralized by 216 million CRV ($102 million). A further $2 million is borrowed against 18 million of Convex’s liquid-wrapper cvxCRV ($8 million).

The 8.75 million CRV sold so far has not made a significant dent in CRV’s market price, given the token’s large market cap (~$520 million) and the current uptrend of the overall market. However, as some parties begin to sell their tokens, others may be encouraged to join them.

One of Egorov’s lenders is convicted fraudster Michael Patryn, known by the pseudonym Sifu. According to research by the (aptly-named) Fudzy, Patryn’s recent withdrawals from lending platform Silo Finance, have led to Egorov chasing liquidity to UwU Lend, Patryn’s own platform, which currently facilitates around $4 million in stablecoin loans.

Sifu is essentially moving the lending hand to UwU which doesnt have the interest rate mechanism at high utilization. This buys both parties more time

interesting trade https://t.co/5emste91Pe pic.twitter.com/gIo2lVNz8v

— Fudzy (@fozzydiablo) January 23, 2024

Read more: Wonderland leader should’ve never trusted Michael Patryn with $1B crypto

This isn’t the first time that Egorov’s situation has landed him in hot water. In November 2022, market manipulator Avraham Eisenberg launched an attempt to short CRV and force a liquidation cascade of Egorov’s positions.

The attempt failed, however, and Eisenberg was arrested the following month for his attack on Mango Markets, in which over $100 million was stolen.

While Egorov is simply using these DeFi platforms as they are intended to be used, his actions have still proven controversial amongst the community, as the imbalance of power between himself and other token holders becomes increasingly clear.