We have all seen bad trades in crypto. Maybe we panic sold at the bottom or aped into something we shouldn't have. But what happened yesterday on Aave is literally rare.
A trader sent 50,432,688 USDT through the Aave Trade trying to buy AAVE tokens. They got back 327 AAVE. That's about $36,651 for $50M dollars.
And in the same block, a MEV bot took that mess and turned it into $36.9 million profit. Here is what actually happened
What the trader was trying to do
The trader was using Aave's collateral swap feature. If you are not familiar, it lets you swap one deposited asset for another without withdrawing first. It is like exchanging your USD savings for EUR savings at the same bank without pulling cash out.
The trader wanted to go from aEthUSDT (their Tether sitting in Aave) to aEthAAVE (AAVE tokens sitting in Aave).
Aave runs all its swaps through CoW Protocol now. It protects you from MEV bots by batching orders and hiding them from the public mempool and CoW protocol did its job. Nobody front-ran this trade. The problem was somewhere else.
Where everything fell apart
CoW's solver unwrapped the aEthUSDT into regular USDT, then pushed the full $50.4M into a Uniswap V3 USDT/WETH pool. That pool had around $18M in reserves. Already very bad in terms of price impact, but at least it's a major pool. Got 17,957 WETH back. Then it sent ALL 17,957 WETH into a SushiSwap AAVE/WETH pool. This pool had 331 AAVE and 17.65 WETH. That's only $86,000 total liquidity.
So, basically $50.4 million going into a pool with $86K in it.
Imagine walking into a tiny corner shop that has 331 apples on the shelf and $17 in the register. You hand the shopkeeper $50 million and say "give me all your apples." He gives you 331 apples. Now the shop has $50M in the register and empty shelves. That's literally what happened here.
After the swap, the pool had 0.327 AAVE and 17,975 WETH. 99.9% of the AAVE gone. Over 1,000x more WETH than before.
MEV backrun attack
Before the next block even started , in the same block 21,643,151 , a highly sophisticated MEV bot spotted what just happened to that SushiSwap pool and jumped in as the very next transaction.
It flash borrowed 14,175 WETH from Morpho, then routed 17.72 ETH through Bancor to BNT to AAVE and then picked up 128.57 AAVE at normal market price. Cost about $36,500.
Now the bot takes those 128 AAVE and dumps them into the same SushiSwap pool that just got emptied. So, in the analogy it is like, someone walks in right after you with 128 apples bought at the supermarket for $36K and sells them to the shop that has zero apples but $50M in the register. The shop is desperate for apples. AMM math does the rest.
128 AAVE in. 17,929 WETH out.
MEV bot they paid back the flash loan in the same tx, kept the profit of 17,912 ETH, which is roughly $36.9 million. Turned $36,500 into $36.9 million in a single transaction.
Where the money went
I traced the internal ETH transfers from the bot contract through the debug trace.
Titan Builder : they build the block, decide which transactions go in and in what order. Got 13,087 ETH from the MEV bot, paid 568 ETH to the block proposer. Kept about 12,519 ETH. Roughly $25.8M. For building one block.
The MEV bot operator : kept 4,824 ETH. About $9.9M.
A Lido validator : got 568 ETH as the MEV-Boost bid. About $1.17M for proposing the block.
The CoW solver : 4.06 AAVE. About $455.
The trader : 327 AAVE which is only $36,651 in the exchange of $50.4M
Shouldn't slippage have caught this?
This is what everyone's asking, but the slippage was set at 1.21%. That's what Aave's platform suggested.
Aave engineer Martin Grabina explained on X that the quote already showed the rate : $50M USDT for fewer than 140 AAVE. That's 99% price impact displayed right there on the screen.
Aave showed a price impact warning. And according to Stani Kulechov, they confirmed the warning on a mobile device and went ahead.
So every warning system worked. The quote was also correct. The user was told. They proceeded. And $50M vanished in 12 seconds.
Everything above is on-chain. You can verify these data onchain :
Victim swap : etherscan.io/tx/0x9fa9feab3c1989a33424728c23e6de07a40a26a98ff7ff5139f3492ce430801f
MEV backrun : etherscan.io/tx/0x45388b0f9ff46ffe98a3124c22ab1db2b1764ecb3b61234e29e5c9732b7fd4ab
