Over the last week, the price of BNB has fallen 25% after the U.S. Securities and Exchange Commission (SEC) sued Binance in a lawsuit that alleges, amid a host of other charges, that BNB and BUSD are securities.
The token’s decline in price has far reaching consequences that extend beyond the scope of retail investor liquidations. If BNB’s price drops below the $220 threshold, then $211 million would be liquidated on DeFi lending platform Venus Protocol.
The situation dates back to an exploit that took place in October 2022, when an attacker exploited the BNB cross chain bridge to mint 2 million BNB tokens. After the exploit, the attacker deposited 900,000 BNB into Venus as collateral and used them to borrow other assets from the protocol.
Although the exploiter’s position remained healthy due to BNB’s price at the time, blockchain analytics firm Messari cautioned that a potential liquidation could cause negative effects on BNB Chain users.
“It’s the single largest potential liquidation in all DeFi that cannot be closed,” noted DeFi researcher Ignas.
To prevent this situation from playing out, the BNB core developer team initiated a proposal to whitelist BNB Chain as the sole liquidator of the exploiter’s position, which Venus’s governance executed with 100% of voters in favor.
Early Monday morning, the Venus team said that the BNB Chain team was prepared to take over the position and no BNB would be dumped on the market.
— 0xScope ( . ) (@ScopeProtocol) June 12, 2023
The liquidator address has been funded with $30 million in USDT to handle the liquidation.