Users of the decentralized finance (DeFi) app Pac Finance were reportedly hit with $24 million in liquidations on April 11 due to an unexpected parameter change made by a developer wallet. Multiple reports on social media and the app’s official Discord server confirmed the incident. In a post to X, the Pac Finance team admitted that the change was made by a smart contract engineer without notifying them in advance. The team assured affected users that they are actively working to address the issue.
Pac Finance is a crypto lending app operating on the Blast network. It enables crypto holders to earn interest by lending their funds. To ensure repayment, the app only allows borrowers to take out loans up to a certain percentage of their collateral, known as the loan-to-value ratio (LTV). Normally, any changes to the LTV are communicated through official announcements.
According to blockchain data from the Blast network, a developer wallet triggered a function on Pac Finance’s PoolConfigurator-Proxy contract at 1:06 am UTC on April 11, setting the LTV for Renzo Restaked Ether (ezETH) at 60%.
This modification led to the liquidation of numerous ezETH leveraging farmers who were found to be in violation of the collateral rules for the protocol. Smart contract developer Roffet.eth criticized the parameter change as “arbitrary” since it occurred without warning.
Parsec Finance founder Will Sheehan also expressed dissatisfaction with the change, stating that it happened “seemingly without warning.” Sheehan estimated that borrowers lost around $24 million in collateral as their assets were automatically sold to repay their loans following the change.
In response to the wave of liquidations, Pac Finance users took their grievances to the app’s official Discord server, demanding explanations. The team’s Discord moderator, Bountydreams, acknowledged the complaints and announced their attempts to contact the team for an explanation. However, as of 7:55 pm, they claimed to have received no response.
Following the publication of these events, the Pac Finance team posted on X acknowledging the issue. They clarified that the parameter change was made by a smart contract engineer who had been instructed to modify the LTV. However, the engineer also altered the liquidation threshold without authorization. The team assured users that they are actively working to mitigate the impact and are implementing measures such as a “governance contract/timelock and forum” to prevent similar incidents in the future.
Mass liquidations are a common problem for leveraged traders who borrow cryptocurrency or cash. However, such incidents typically occur due to sudden price fluctuations in a cryptocurrency, not protocol changes. For example, leveraged Bitcoin traders suffered over $165 million in liquidations on April 2 during a flash crash, and another $110 million in Bitcoin positions were liquidated on April 9 due to a sudden price surge.
Update (April 12, 2:12 pm UTC): This article has been updated to include a statement from the Pac Finance team.