A crypto trader lost millions after executing a massive token swap through decentralized finance platforms, while a Maximal Extractable Value (MEV) bot captured nearly $10 million in profit from the transaction.
The swap involved approximately $50.4 million in Tether (USDT) that was transferred from Binance to a newly funded wallet. The user attempted to convert the entire amount into the Aave token using CoW Protocol along with the decentralized exchange SushiSwap.
However, blockchain data from Etherscan shows the wallet ultimately received only 327 AAVE tokens, worth roughly $36,000 at market prices. The trade implied an effective price of about $154,000 per token, far above the market value of around $114.
MEV Sandwich Attack Exploits the Transaction
The loss was worsened by a “sandwich attack” carried out by a MEV bot, which monitors pending blockchain transactions for profit opportunities. The bot executed a front-running trade by borrowing roughly $29 million in wrapped Ethereum through the lending protocol Morpho.
It purchased AAVE tokens on Bancor to inflate the price before the large swap was processed, then sold the tokens on SushiSwap after the user’s trade pushed the price higher. The strategy generated an estimated $9.9 million profit.
Slippage Warning Ignored During Transaction
Stani Kulechov, founder of the Aave protocol, said the platform had warned the user about “extraordinary slippage” due to the unusually large order size. Despite the alert appearing on the trading interface, the user confirmed the transaction and proceeded.Representatives from CoW DAO said the trade required explicit confirmation after displaying a warning that the user could lose nearly all the value of the swap.
Following the incident, CoW DAO acknowledged that decentralized finance platforms still face usability challenges that can leave traders vulnerable to costly mistakes. The organization said it would refund any protocol fees related to the transaction.
Kulechov also stated that Aave would attempt to contact the affected user and return roughly $600,000 in fees collected from the swap. He noted that while decentralized finance remains open and permissionless, additional safeguards could help protect users executing large transactions.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.