For the second time in a matter of days, liquidators have stepped in to restore the health of a notorious DeFi lending position.
A whitelisted liquidator address controlled by core Binance Coin (BNB) team members seized $32.6 million worth of BNB on Monday morning from a notorious Venus Protocol lending position in order to liquidate $29 million worth of stablecoins. The position still has $94 million outstanding.
The position was created in October 2022 following a Binance Smart Chain bridge hack, one of the largest in crypto history. The attacker, believed to be the North Korean-funded Lazarus Group, stole $560 million worth of BNB.
Unable to sell all of it efficiently, they opted to deposit a major sum into Venus, using the BNB as collateral to take a stablecoin loan of $150 million that was then largely bridged to different chains.
On lending protocols such as Venus, “liquidators” are often bots that seize collateral to sell and repay a delinquent user’s position if it falls below a certain collateralization rate. Because of the size of Lazarus Group’s BNB position, liquidation could send the price spiraling and put the protocol at risk of bad debt — and the entire ecosystem at risk of cascading liquidations.
As a result, BNB core team members proposed becoming the sole whitelisted liquidator of the position in November 2022. The team would take on the BNB and refrain from selling it, and instead pay down the debt to prevent systemic risk.
The team finally had to step in on Friday, using half of a $60 million stablecoin fund deposited into the liquidator address to pay off $30 million in debt across three transactions.
Earlier today, they spent the remainder of the fund and paid off an additional $30 million.
The position currently remains unhealthy and is poised for another liquidation at a BNB price of $198. While it initially appeared that the liquidator address was out of stablecoins, an additional $30 million in USDT has been added to the address from Binance.
In an interview with Blockworks, pseudonymous Venus BD & Community Lead “Danny” said that “BNB Chain will continue to monitor and manage the health of the account as necessary.”
BNB currently sits at $210.
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