BNB Bridge Attackers’ Venus Loan in Focus as the Token Plummets

BNB’s downtrend has brought a notorious lending position arising from the October 2022 BNB exploit into focus.

Man looking down the cliff, seeing a meteor shower of BNB tokens, shooting into the ground.
Created by Kornelija Poderskytė from DailyCoin
  • BNB has suffered a significant price decline in the past week.
  • The downtrend has brought a notorious lending position arising from the October 2022 BNB exploit into focus.
  • Binance, through the BNB chain team, has been actively managing the position since Friday, August 18.

In October 2022, BNB’s cross-chain bridge was exploited for 2 million BNB worth over $500 million at the time. Following the exploit, the attackers deposited 900,000 BNB worth about $250 million as collateral on Venus Protocol to borrow $150 million in stablecoins.

Many months later, nearly $200 million worth of collateral faces the threat of liquidation and looms large over the BNB DeFi ecosystem. With BNB recently tanking to yearly lows, the bad debt has again come into focus.

BNB Bridge Attack Venus Loan Back in Focus

At the time of writing, BNB is trading at $209.41, representing a 13% decrease over the past seven days and a 3.1% decrease over the past 24 hours, per data from CoinGecko.

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Amid BNB’s tanking price, the BNB bridge attackers’ Venus lending position has again come under scrutiny. Many speculate that Binance was propping up the value of BNB to prevent the liquidation of nearly $200 million worth of collateral out of fear that it could have unspeakable effects on not only the BNB chain but also Binance itself.

But these fears have failed to materialize even though the asset has dropped below the closely watched $212 price point. This outcome is primarily thanks to the BNB chain’s core team efforts to liquidate the position manually, not prop up the token’s price, as has been frequently alleged.

Since Friday, August 18, the BNB chain team has absorbed $60 million in liquidations by making USDT repayments at liquidation levels. The BNB chain team made the most recent $30 million repayment on Monday, August 21, bringing the outstanding collateral down to about 628,173.77 BNB, worth approximately $130 million per DeBank data at the time of writing.

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While the BNB chain is not out of the woods yet, Binance has reportedly committed to managing the liquidation of the account with plans to burn the BNB collateral obtained from the process. The BNB chain team entered an agreement with Venus Protocol to manage this process in November 2022. 

Following the recent $60 million repayments, Binance has funded the BNB chain liquidator address with an additional $30 million. Binance CEO Changpeng “CZ” Zhao has hinted that the process is being funded from the exchange’s Secure Asset Fund for Users (SAFU), which currently holds about $900 million worth of crypto assets, including Bitcoin (BTC), BNB, USDT, and TUSD. 

On the Flipside

  • Cinneamhain Ventures partner Adam Cochran has sparked questions about the source of funding for Binance’s SAFU, suggesting that it is funded by customer deposits.
  • Curve Finance recently navigated a similar situation by selling CRV tokens to multiple market makers to stabilize an over $100 million loan taken by Curve founder Michael Egorov that faced the risk of liquidation following a $60 million exploit.

Why This Matters

The BNB bridge attackers’ Venus lending position is one of the largest such positions in DeFi. Experts have previously suggested that the liquidation of the lending position would lead to a BNB price crash with devastating effects on the BNB ecosystem and Binance.

Read this to learn more about speculation that Binance is artificially propping the price of BNB:

More Binance FUD? CZ Denies Rumors of Selling Bitcoin for BNB

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This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.