- Pac Finance users have lost over $20 million through liquidations
- They were liquidated after a platform developer abruptly changed critical parameters
- The protocol’s founder acknowledged the situation with the platform saying it’s working to mitigate the issue
DeFi platform Pac Finance users are lamenting losing over $20 million after a platform developer unexpectedly changed operating parameters causing mass liquidations. An analysis of the situation unearthed that the developer increased the loan-to-value (LTV) ratio for Renzo Restaked Ether (ezETH) to 60% forcing the platform to automatically close existing trades that didn’t meet the new LTV standard. The protocol’s founder acknowledged the problem and the platform disclosed it’s in contact with affected users, raising hopes that affected users will be refunded.
A Strategy to Mitigate the Issue
In an X (formerly Twitter) post, Pac Finance said that the change in LTV ratio was made by a “smart contract engineer” whom it had entrusted to “make the necessary changes.” The platform added that they’re in contact with affected users and are working out a strategy “to mitigate the issue.”
Thank you for letting us know Will. We are aware of the issue and are in contact with the impacted users, actively developing a plan with them to mitigate the issue.
In our effort to adjust the LTV, we tasked a smart contract engineer to make the necessary changes. However, it…
— Pac Finance (@pac_finance) April 11, 2024
The DeFi platform also admitted that its current model of changing critical parameters needs to be revamped. According to the protocol, it’ll use a “governance contract./timelock and a forum” to ensure key network changes are communicated to the community ahead of time.
The incident has caused an uproar within the DeFi circles with some describing the parameter change as arbitrary and criminal while others advised the platform’s users to withdraw their funds.
We should be grateful that the incident was limited to only a 26m liquidation 🙏
Please, LRT protocols, discourage your users from participating in these protocols⛔️
So what happened?
$26m got liquidated on @pac_finance , a lending protocol on blast.
An EOA wallet (0xae),… https://t.co/76v0tekNmr
— kydo.eth/acc 🦇🔊 (@0xkydo) April 11, 2024
Undoxxed with Zero Knowledge
Others noted that such scenarios are bound to happen since most developers, especially on new chains, “are undoxxed with zero experience.” Pac Finance is powered by the recently launched Ethereum scaling layer Blast.
This is a perfect example of why to not trust most new DEXs/ LPs/ defi on new chains.
Too many teams are undoxxed with zero experience.
It’s 100x easier to set up a defi site than people think.
It’s also 10x easier to lose people’s funds, make mistakes, and get hacked than…
— LOOP⚡️ (@LoopxNFT) April 12, 2024
Although liquidations are a common phenomenon in the crypto world, it’s usually due to fluctuating market conditions and rarely due to smart contract engineers tampering with LTV ratios without notice.
