Ross Ulbricht, the founding father of the infamous Silk Highway market, just lately made headlines once more—not for his controversial previous or his pardon by former President Donald Trump, however for a staggering $12 million loss incurred whereas buying and selling a memecoin on the platform Pump.enjoyable.
Ross Ulbricht $12 Million Mistake
On January 29, Ulbricht, or a person with entry to his Solana pockets, reportedly tried to handle liquidity for ROSS tokens, a meme coin created by his supporters to boost funds following his launch.
Ross Ulbricht acquired 50% of the entire provide of those tokens, which have been designed to generate monetary assist within the wake of his pardon. As a substitute of liquidating his holdings unexpectedly, he sought so as to add liquidity step by step on Raydium, a decentralized trade (DEX) working on the Solana blockchain.
Nonetheless, Ulbricht’s try to offer liquidity was marred by a vital error. In organising the liquidity pool, he mistakenly utilized a Fixed-Product Market Maker (CPMM) mannequin as an alternative of the extra refined Concentrated Liquidity Market Maker (CLMM) mannequin.
The CPMM mannequin, which is the usual for automated market makers, doesn’t enable liquidity suppliers to set particular value ranges for his or her trades. Consequently, Ulbricht’s tokens grew to become obtainable for buying and selling at an unfavorable value, resulting in fast and unintended market penalties.
ROSS Tokens Plunge 90% After MEV Exploitation
This misconfiguration attracted the eye of a maximal extractable worth (MEV) bot—an algorithm designed to scan blockchain transactions for worthwhile alternatives and execute trades at lightning velocity.
The bot seized the second, buying $1.5 million value of ROSS tokens at a steep low cost, then promptly reselling them at a revenue into the present liquidity pool. The fast exploitation of the mispriced tokens triggered a major value drop, triggering a cascade of losses.
In an effort to rectify the state of affairs, Ross Ulbricht attempted to repair his liquidity setup however fell into the identical lure, in the end shedding an extra $10.5 million. This introduced his complete losses to a staggering $12 million because the MEV bot continued to use the misconfigured liquidity.
The fallout from these transactions resulted in a 90% crash within the token’s value, eroding a good portion of its market worth.
Regardless of these setbacks, Ross Ulbricht retains 10% of the ROSS token provide in one other pockets, now appropriately configured on Raydium’s CLMM swimming pools. These remaining holdings are estimated to be value round $200,000, a mere fraction of the unique funding.
Featured picture from DALL-E, chart from TradingView.com