Venus Protocol XVS Liquidation Cascade — May 18, 2021 Post-Mortem (Aggregated)
The Incident
On May 18th, 2021, Venus Protocol (on BSC) suffered $200M+ in liquidations due to price manipulation of the governance token (XVS), which led to $100M+ of bad debt accumulation. No funds were stolen directly — losses came from cascading liquidations.
Price Movement
The XVS token jumped 88% from $76 to $143 and then crashed 50% to $72, all over the course of six hours on May 18.
How It Happened
• When the XVS token suddenly spiked in value, borrowers were able to use it as collateral at the new, vastly increased $140+ price point.
• Then, when the price dropped, many of those XVS loans became under-collateralized, triggering the $200M liquidations.
• A majority of the trading for XVS was happening on Binance, which had low liquidity for XVS, allowing its price to be easily manipulated.
Official Explanation
In a post-mortem report, Venus founder Joselito Lizarondo said that market volatility led to cascading liquidations, but that the protocol worked as intended. Lizarondo noted that the XVS price spike was caused by large market orders and excitement for the upcoming Venus Reward Token (VRT). VRT would be airdropped to XVS holders based on a snapshot taken on May 17.
Aftermath
Lizarondo claimed that "the protocol worked as intended" and "no funds are lost," but acknowledged the bad debt, stating that Venus would use its grant program and "utilize XVS" to cover the shortfall. Allegations later emerged on-chain blockchain data suggesting Venus team accounts may have been involved in price manipulation.