- A trader attempted to swap $50.4 million USDT into AAVE but received only 324 tokens worth about $36,000.
- The trade executed with about 99% price impact, implying an effective purchase price near $154,000 per AAVE.
- A MEV bot detected the transaction, executed a sandwich attack using a $29 million ETH flash loan.
A crypto trader lost almost the full value of a $50 million transaction after executing a large token swap through the Aave interface. The trade produced extreme price impact and drew attention to the risks of placing very large orders directly on decentralized exchanges.
Blockchain data shows a wallet that recently withdrew funds from Binance attempted to swap about $50.4 million in USDT into the Aave governance token, AAVE.
The order was routed through the Aave interface, which uses the CoW Swap aggregator and liquidity from decentralized exchanges such as SushiSwap. However, the wallet received only 324 AAVE tokens worth about $36,000 at the time of execution.
Massive Price Impact on a Single Order
The trader attempted to convert roughly $50 million USDT into AAVE in a single transaction. Available liquidity for the pair was far too small to absorb an order of that size.
The final execution implied an effective purchase price near $154,000 per AAVE while the market price traded near $111 to $114. In total, the trader lost about $49.96 million relative to the original order value.
Internal trade data showed the quoted rate before execution already implied extreme price impact. The quote suggested that $50 million USDT would return fewer than 140 AAVE even before additional fees and slippage adjustments.
Engineers later explained that the main issue was not the slippage tolerance setting itself. The trader accepted a quote that already showed about 99% price impact before the transaction moved forward.
Warnings Appeared Before the Trade
The Aave interface displayed a warning about extraordinary slippage because of the unusually large order size. The system required the user to manually confirm the risk through a checkbox before execution.
The trader proceeded with the swap through a mobile device after accepting the warning.
Aave founder Stani Kulechov later clarified that the infrastructure functioned as intended. The CoW Swap routing system processed the order normally and the transaction could not move forward unless the user accepted the risk shown on screen.
The protocol plans to return roughly $600,000 in fees generated from the transaction as a goodwill measure while attempting to contact the wallet owner.
Related: zAave Becomes First Lending Protocol to Cross $1 Billion in RWAs
The large order also attracted activity from a maximal extractable value (MEV) searcher. Blockchain data shows a bot detected the pending transaction and launched a sandwich strategy around it.
The bot first borrowed about $29 million in wrapped Ether through Morpho and used the funds to buy AAVE on Bancor, pushing the token price higher before the user trade executed.
Once the trader order cleared at the inflated price, the bot sold the tokens on SushiSwap. The maneuver generated about $9.9 million in profit.
To secure its position inside the block, the searcher paid about 16,927 ETH, roughly $34.8 million, to Titan Builder. The block builder then passed around 568 ETH, or about $1.2 million, to the validator that proposed the block.
Related: Lido Finance to Reimburse Users After Aave CAPO Oracle Misquote
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Source: https://coinedition.com/a-50m-aave-swap-goes-wrong-as-trader-receives-only-324-token/
