Crypto trader loses $50M in DeFi swap; MEV bot profits

A trader lost $50.4M in USDT after swapping for just $36K in AAVE due to slippage and low liquidity. Arbitrage traders and a MEV bot profited. Aave refunded $600K in fees.

A crypto trader experienced a devastating loss after swapping $50.4 million in USDT for only about $36,000 worth of AAVE tokens. The transaction was executed via CoW Protocol and routed through Uniswap V3 and SushiSwap. Catastrophic slippage occurred due to extremely low liquidity in the AAVE/WETH pool. Despite receiving multiple warnings about extraordinary slippage, the trader proceeded, resulting in a 99.9% loss of value. Arbitrage traders and a MEV bot quickly exploited the price dislocation, with the bot reportedly earning $10 million from the event. In response, the Aave team announced a $600,000 refund in collected fees as a goodwill gesture. This incident underscores the risks of executing large trades in illiquid DeFi markets and highlights the critical importance of slippage protection.