Pac Finance allegedly triggers $24M worth of liquidations due to an abrupt alteration in parameters.
The uproar among the crypto community erupted after allegations surfaced that an administrator wallet associated with Pac Finance had modified crucial parameters for ezETH loans, catching unsuspecting users off guard.
According to various reports on X and Pac Finance’s official Discord server, users of the decentralized finance (DeFi) platform experienced $24 million in liquidations on April 11. This occurred due to an unexpected modification in parameters initiated by a developer wallet.
While the team’s Discord administrator asserts that they have informed the team about the issue, there has been no official announcement from the team regarding the incident as of the time of writing.
Pac Finance is a Blast network-based crypto lending application that enables crypto holders to deposit their assets and generate interest by participating in lending activities.
To ensure that borrowers repay their loans, the application restricts them to borrowing amounts that are a percentage of the value of their collateral.
The development team can adjust this percentage, known as the “loan-to-value ratio” (LTV), but typically, such changes are announced beforehand.
Based on data from Blast network’s blockchain, a developer wallet executed a function on Pac Finance’s PoolConfigurator-Proxy contract at 1:06 am UTC on April 11, establishing the LTV for Renzo Restaked Ether (ezETH) at 60%.
Smart contract developer Roffet. eth stated that this adjustment led to “the liquidation of a significant number of ezETH leveraging farmers,” as these borrowers were suddenly in breach of the protocol’s collateral regulations.
Roffet criticized the parameter change as “arbitrary,” claiming that it was carried out without prior warning
Will Sheehan, the founder of Parsec Finance, also voiced his criticism of the alteration, alleging that it took place “seemingly without warning.”
According to Sheehan’s estimation, borrowers incurred losses of around $24 million in collateral as their assets were liquidated to settle their loans following this modification.
As the gravity of the situation became clear, Pac Finance users flocked to the protocol’s official Discord server, venting their frustration and demanding answers from the platform’s team.
In response, Bountydreams, the team’s Discord moderator, announced their efforts to reach out to the team for an explanation. However, by 7:55 pm, they reported that they had yet to receive any response.
Mass liquidations pose a common challenge for leveraged traders who utilize borrowed cryptocurrency or cash.
Typically, these incidents occur due to abrupt fluctuations in cryptocurrency prices rather than protocol adjustments. For instance, on April 2, leveraged Bitcoin traders faced liquidations totaling over $165 million during a flash crash.
Similarly, on April 9, approximately $110 million worth of Bitcoin positions were liquidated as its price surged unexpectedly.
Read also: Sora Ventures & Metaplanet partner for ‘Asia’s Microstrategy’ pre-bitcoin halving
