Curriculum·J304 Lending, Borrowing, and Collateralized Leverage·about 41 min
The liquidation event
By the end of this lesson you can
- →Compute what a liquidation takes from you, including the penalty
- →Identify the band between liquidatable and unprofitable to liquidate
- →Name the four dependencies a liquidation requires, each of which can fail
- →Explain why a large liquidation moves the price against itself
Junior · enrolled learners
This lesson opens with The Aave CRV liquidation, November 2022.
- What happened
- In November 2022 Avraham Eisenberg borrowed about 40 million CRV, worth roughly $20M, against collateral on Aave, moved the tokens to a centralized exchange and sold them, apparently intending to drive the price down far enough to force liquidation of a large CRV-collateralised position held by Curve's founder. On-chain observers identified the trade, bought CRV, and the price rose by more than forty percent. Eisenberg's own borrow became undercollateralised and was liquidated. He reportedly lost about $10M. The liquidation itself did not fully cover the debt, leaving Aave with roughly $1.6M of bad debt, about 2.7 million CRV, which the protocol later cleared by purchasing CRV on the market.
- The decision point
- The liquidation worked. It triggered on time, liquidators executed it, and it still left bad debt, because closing a $20M position in CRV required selling CRV, and selling that much moved the price against the sale. A liquidation is not an accounting entry that restores solvency. It is a large market order in a finite book, per J302-01, and its own price impact is part of whether it succeeds.
- Recorded loss
- $1,600,000
What you will be able to answer
- →What does a liquidator receive?
- →What is the band between liquidatable and unprofitable?
- →What four things does a liquidation require?
- →Why can a large liquidation leave bad debt even when it executes?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://thedefiant.io/news/defi/crv-trade-aave-bad-debt
- https://www.coindesk.com/markets/2022/11/22/mango-exploiter-gets-liquidated-after-roiling-aave-using-20m-of-borrowed-curve-tokens
- https://research.kaiko.com/insights/crv-aave-liquidation
- https://medium.com/@whiterabbit_hq/black-thursday-for-makerdao-8-32-million-was-liquidated-for-0-dai-36b83cac56b6
Confidence high·Volatility medium·Reviewed 2026-08-06·Owner unassigned
Contested
Eisenberg's intent is inferred from on-chain activity and from his own subsequent statements, and this lesson does not depend on it. The mechanism being taught is that a $20M liquidation in CRV left bad debt, which is a fact about depth rather than about motive.
R402-02 covers liquidation in the perpetuals context at Senior level, where funding, mark price and auto-deleveraging change the mechanics. This lesson covers collateralised borrowing only. Keep the split.