Solend Reverses Vote to Liquidate $300 Million Wallet

The Solend Protocol on Monday reversed a vote to liquidate its largest user, with developers saying they had been “listening” to “criticisms” of the proposal.

The protocol took a hastily-conducted vote on Sunday — through a decentralized autonomous organization (DAO) formed on Saturday — to liquidate the user, who holds a $108 million loan through the protocol backed by $170 million in collateral. The loan isn’t set for liquidation until Solana drops to a price of around $22, but developers said allowing the position to liquidate on its own would break the protocol. Solana stood at $34 on Sunday, and briefly $36 on Monday, after dropping to $25 earlier in the week.

“We’ve been listening to your criticisms about SLND1 [Sunday’s vote] and the way in which it was conducted,” developers wrote on their website early Monday. “The price of SOL has been steadily increasing, buying us some time to gather more feedback and consider alternatives.”

In light of developments, they said they proposed “invalidating” the first vote, and requiring that future votes take at least a full day to conduct. “We recognize that a voting time of one day is still short, but we need to act swiftly to address the systemic risk and fact that normal users can’t withdraw USDC,” they wrote. “We ask our community to be active in governance in the next few days. Voting time will be revisited in a future proposal.”

The proposed reversal was set to pass as of Monday afternoon, with 99.8 percent of votes expressing support and a little less than nine hours left to participate. However, users expressed mixed reactions in comments on the website.

“What we should avoid at all costs is selling SOL into a liquidation cascade, accumulating a ton of bad debt, price rebounds quickly after that, and some sharks scoop up all the SOL making a quick 50+ percent while Solend users are left with bad debt,” one user commented. “I don’t care about Crypto Twitter hate if that means salvaging $120 million retail dollars instead of holding up DeFi ethos for some whale degenerately gambling away 9-figure positions. With power comes responsibility, and the whale is showing none.

“But if we can work out a better solution and it seems like the market is giving us a bit of time,” the user added. “I’m in favor of SLND2 [Monday’s reversal vote]. We need to be quick with SLND3 [a third vote], though. Things can look very different in 24 hours already.”

“Absolutely, there are better ways to go about this than SLND1,” another user wrote. “Changing margin requirements is fine, but taking over the account is a big no-no. A better way is to get a deal with a MM [market maker] to provide the necessary DEX [exchange] liquidity. Besides, that would be profitable for the MM too.”

Solend’s developers said prior to the first vote that they tried numerous methods for getting in touch with the wallet’s owner before proposing that they take over the account, but that they had been unsuccessful. The wallet’s missing owner theoretically has enough cash to determine the outcome of any vote on the protocol, but has not been active in roughly two weeks.