Man Swaps $2M for $0.05 USDT Due to USDC Panic

March 12, 2023 at 05:57 AM GST updated: March 12, 2023 at 05:05 PM 2 mins read DeFi News

One person made a transaction that caused him to lose almost $2 million.
The trader used KyberSwap but did not set a slippage tolerance.
KyberSwap is now working with various entities to help the person.

Amid the ongoing Circle USD (USDC) depeg due to Silicon Valley Bank’s recent collapse, one person mistakenly converted $2 million worth of crypto to $0.05.

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With USDC insolvency fears rampant, users are fleeing to safety in other stables. Not all of them are going to make it there in one piece, however.

Here's how one unlucky user paid $2,080,468.85 to receive $0.05 of USDT. pic.twitter.com/R8YdudWfsV
— BowTiedPickle.eth | Solidity Shipper (@BowTiedPickle) March 11, 2023

According to the thread, the person, whose identity has not been revealed, failed to set a slippage tolerance when he initiated a trade on KyberSwap.

For those who are not familiar with decentralized finance (DeFi) exchanges, slippage tolerance refers to the number of tokens that a person is tolerating to accept in case the price changes drastically when the transaction is ready to do.

Unfortunately, the person may not have set the slippage tolerance due to panicking. Otherwise, he might not be comfortable using a DeFi protocol.

Due to this, the system selected a faulty or neglected pool that contained around $2 in liquidity.

2 million 3CRV slam into the pool with the force of a thousand suns, and x * y = k does its grim work.

Exactly 54182 units of USDC, worth about 5 cents, leave the contract for the second leg of the swap, where they are happily swapped into USDT, and go on to the swapper.
— BowTiedPickle.eth | Solidity Shipper (@BowTiedPickle) March 11, 2023

KyberSwap caught wind of the situation and tried to perform a similar transaction. However, the issue was not replicated because the platform displayed a message that shows the sheer change in value.

At the moment, KyberSwap is working with the person who lost $2 million on how best he can be able to recover some of his money — if not all.

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Currently, the KyberSwap team is:

1. In touch with the user to work through the issue.
2. Contacting the bot creator, bot user & Coinbase, amongst other parties to assist with funds recovery.
3. Conducting a post-mortem which will be shared soon.
— Kyber Network (@KyberNetwork) March 11, 2023

In addition, KyberSwap said that it has updated its user interface (UI) to provide clearer warnings to users who may otherwise do the same mistake.

To be clear, there was no hack or scam that occurred. This was an example of an honest mistake that an automated bot saw as an opportunity to make a profit — and a huge one at that.

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