Wu reports that the yield protocol PiggyBank posted stating that a month ago it established LAB-related positions with $100,000, employing a strategy of discounted buying of locked LAB and hedging with short perpetual contracts. PiggyBank says that because LAB exhibited extreme volatility in a low‑liquidity environment and the funding rate depth was negative, maintaining the hedge is no longer economically justified, so the short has been closed. At current prices, the locked LAB position is valued at about $1.35 million, but due to insufficient liquidity it will not be counted in NAV until the first unlock on August 14. As a result, today the USDC vault NAV will decline by roughly 15%, SPYx by about 12%, and JitoSOL by around 9%. PiggyBank says a detailed report will be released next week.
On‑chain sleuth ZachXBT subsequently criticized the use of user assets for high‑risk token trading and, back in May, had questioned LAB’s opaque private‑loan/OTC arrangements, vesting‑period adjustments, market‑making coordination, and highly concentrated supply.
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45.9K @Usoppu Crypto is a very serious industry
Piggybank used user funds to buy $100k of discounted, locked $LAB tokens and opened a short position to protect against price drops.
Price manipulation made holding the short too expensive. They closed it (or liquidated?) leaving the investment completely unprotected.
Though the locked tokens hit $1.35M on paper, they can't sell until August 14.
This unprotected risk caused major vault drawdown losses - ~15% in USDC, ~12% in SPYx, and ~9% in JitoSOL.
4.2K @piggybank_fi Dear Community,
- One month ago, PiggyBank got into a new position for $100k (~2% of the portfolio at the time), as part of the strategy’s scope of deploying into mid-cap basis trades.
- The strategy involved purchasing locked $LAB tokens at a significant discount through a Tier-1 OTC desk and hedging that exposure through perpetual shorts. During the holding period, $LAB experienced violent manipulation, including chaotic price movements on thin liquidity, and deeply negative funding rates.
- Maintaining the hedge became economically irrational and would have caused us to cross our risk thresholds. We therefore decided to close our short to cap the downside.
- In accounting terms, the total value of our $LAB locked position is $1.35m at current prices. However, due to the illiquid nature of this position, Piggybank is excluding it from the NAV until the first unlock on August 14. Even though this is an evolving situation that could still generate substantial returns, this is the fairest and most transpar
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14.7K @cryptoawos You can laugh at me.
I tossed in a few pennies (very little) into @piggybank_fi SPYx and they used the funds to buy OTC #LAB (which I had warned about 😂). It went badly for them and I lost -12% without doing anything.
Crypto is a difficult love 😁
5.3K @derparsel This feels wrong on so many levels.
@piggybank_fi used a 'Long Spot / Short Perp' strategy, but not the way you should and how they explain in their own documentation.
The result: Heavy losses (with the exact outcome yet to be known).
This is my breakdown of the situation 👇
▶️ WHAT HAPPENED?
Piggybank invested $100,000 (approximately 2% of its portfolio at the time) in a mid-cap basis trade. However, instead of buying the underlying asset on the liquid market, it acquired locked $LAB tokens at a discount through an OTC (over-the-counter) desk. A perpetual short position was opened as a hedge.
The problem: The $LAB token experienced severe price manipulation, low liquidity, and deeply negative funding rates. This made maintaining the short position (hedge) too expensive and "economically irrational."
Piggybank had to close the short position to limit the risk of further losses. However, since the purchased $LAB tokens are locked until August 14, the spot position could not be sold at the same time. Pigg
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