Whale Avoids $16M Fine When Liquidating $75M DeFi Position
Date: 2025-03-11 Author: Gabriel Deangelo Categories: CRYPTO PAYMENTS
In March 2025, a major Maker user avoided a $16M fine that would have been imposed due to a default on an approximately $75M loan received in 2021. The position was on the verge of liquidation, but the borrower took the necessary steps to ameliorate the situation by sending 2,000 ETH and 1.5 million DAI.
Before adding funds, the liquidation price was around $1932.08. The debt-to-collateral ratio of 65,675 ETH decreased to 176%, allowing the liquidation price to drop to $1874.98. As a result, the collateral ratio increased to 181.95%. After Ethereum’s price dropped further, the borrower withdrew an additional 2,882 ETH and used it to pay off 5.21 million DAI. This lowered the liquidation price to $1,781.28.
At the time of writing, the debt-to-collateral ratio remains at a critical level of 179.87%. A former Maker employee known as andy8052 noted that Chronicle oracles update their data every hour using delayed prices. This system helps users detect liquidation threats early and gives them the opportunity to strengthen their collateral or pay off the debt.
The MakerDAO liquidation process includes a penalty that is added to the total debt if the asset is under-collateralized. The protocol then auctions off the collateral, leaving the trader liable for the remaining debt minus the penalty. According to DeFi Llama, if the Ethereum price drops below $1,796.7 or $1,777.8, certain positions will be at risk of liquidation, affecting 61,000 ETH (worth $115.4 million) and 65,400 ETH (worth $123.87 million).
Lookonchain analysts also recorded a whale selling 25,800 ETH ($47.8 million) at a loss of $32 million to avoid a forced close on the Aave platform. At that time, the user had 35,034 ETH ($64.68 million) left, and the liquidation price was set at ~$1,316. It was also noted that about 30,098 ETH ($56.1 million), likely related to the Ethereum Foundation, were transferred to Maker to reduce the liquidation price to $1,127.06. This address holds 100,394 ETH worth $182 million.
Some large players were not able to avoid liquidation. One user lost 67,675 ETH ($121.8 million) after failing to lower the liquidation price below the threshold. Despite attempts to mitigate the risk with a deposit of 2,000 ETH and 1.54 million DAI, spot prices fell below this level.
This case highlights the importance of timely action in a volatile crypto market, especially for large borrowers in DeFi protocols.
