The token of decentralized exchange Curve Finance (CRV) appears to have taken a major hit, as analysts at Lookonchain described on Nov. 22 short seller attackAccording to Lookonchain, the address ponzishorter.eth associated with Mango Markets developer Avraham Eisenberg first exchanged $40 million in tokens (USDC) for decentralized finance protocol Aave on Nov. 13 to borrow CRV for the sale.

The action allegedly caused the price of CRV to drop from $0.625 to $0.464 this week. Fast forward to today, and blockchain data shows that ponzishorter.eth borrowed another 30 million CRV ($14.85 million) in two transactions and transferred it to OKEx for sale. The team at Lookonchain hypothesized that the transaction was made to drive down token prices, “so many people who used CRV as collateral would face liquidation.”

Wallets associated with Curve founders added 20 million CRV as collateral in response to the massive sell-off. On Aave, wallet addresses have a health factor of 1.65 at the time of publication, indicating excess collateral relative to borrowed assets.

but as Tell According to blockchain analytics firm Arkham, the transactions “could be just bait,” with Aave the main target. Arkham claims Eisenberg built a position of more than $100 million on Aave for complex trading schemes.

It first involved the distraction of the CRV token on Aave, which has poor liquidity on the platform but very low margin requirements, both of which were important factors in the exploit. The ensuing attention will prompt users to buy heavily into the lows to defend the price of CRV, and for others, to try to squeeze short sellers to cover losses on their positions.

However, the real plot seems to be to exploit the possibility that Aave will not be able to cover Eisenberg’s CRV short position, as the platform allegedly does not have enough liquidity to buy back more than 20% of the short position. This would be good for betting on a drop in the price of Aave and its native token:

“The real target here is AAVE’s fragile circulatory system, which Avi mentioned last month. Using $40 million to borrow nearly $50 million in CRV could leave AAVE with serious bad debt.”

“In order to liquidate Avi’s position, the Aave liquidator will not be able to buy back all the CRV he borrowed. AAVE will have to sell a large number of tokens from the security module to cover this loss,” Arkham wrote. A screenshot of the swap quote provided by the company shows that for an estimated $100 million position, the potential swap impact between USDT and CRV is 89.8%.

At press time, CRV was up 15.47% over the past 24 hours to $0.5742, while Aave’s price was down 6.33% to $53.54 over the same period. On Oct. 11, Eisenberg siphoned $117 million from the Mango Markets protocol, kept $47 million as bug bounties, and returned the rest, calling it a “highly profitable trading strategy.”