Aave freezes low-liquidity pools for 17 Ethereum-based tokens

The decision to temporarily pause lending markets for 17 tokens and stablecoins on Ethereum comes a week after the Mango Markets exploiter left protocol with $1.6 million in bad debt.

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Aave, the biggest decentralized lending platform on Ethereum with $3.65 billion in total value locked, halted lending of several tokens on Aave V2, following the landslide governance vote in favor of the proposal (99.9% YAE, 0.1% NAY).

“Given that the market situation of these assets is currently volatile, out of an abundance of caution, we recommend temporarily freezing the following markets: YFI, CRV, ZRX, MANA, 1INCH, BAT, sUSD, ENJ, GUSD, AMPL, RAI, USDP, LUSD, xSUSHI, DPI, renFIL, and MKR,” November 23 proposal reads.

The protocol will not allow users to deposit the said tokens or take loans with them due to their volatility and low liquidity.

The move is meant to protect protocol against short-selling attacks like the one allegedly attempted by Avraham Eisenberg, Mango Markets exploiter, a week ago. On November 22, the wallet associated with Eisenberg borrowed 92 million CRV ($57 million) on Aave and started to sell tokens relentlessly, causing a sharp decline in CRV price. Although the hacker suffered a short squeeze and had to back off after incurring seven-figure losses, Aave also accrued a bad debt of $1.6 million while trying to cover Eisenberg’s CRV short positions.

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On October 11, Eisenberg siphoned $116 million from the Solana-based trading platform Mango Markets and kept $47 million as a bug bounty before returning the rest of the stolen funds. He claimed having worked with a team and called the exploit a “highly profitable trading strategy,” denying the illegal nature of his actions.