Curve Founder Proposes Market-Driven Recovery for LlamaLend Bad Debt

Michael Egorov, the founder of Curve, has introduced a proposal to resolve approximately $700,000 in bad debt within LlamaLend, the protocol's lending arm. The debt originated in the CRV-long market following a massive deleveraging event on October 10, which was triggered by geopolitical volatility and tariff announcements. During the crash, rapid price declines and high gas fees prevented timely liquidations, leaving some lender positions only 70% backed. Instead of utilizing a DAO-funded bailout, Egorov proposes packaging these distressed claims into a tokenized vault. These tokens would then be traded in a dedicated Curve pool using a Stableswap design, with liquidity centered around the current 71% solvency level rather than full value. This approach allows the market to determine the actual value of the distressed claims. For trapped depositors, the pool offers an immediate exit ramp if they are willing to accept a discount. Simultaneously, it creates an investment opportunity for outside buyers. Because the positions are already partially backed by crvUSD, the risk is capped on the downside, while the upside remains open if the governance token recovers. According to the proposal, the positions would begin to 'deliquidate' and recover value if CRV rises above $0.96, with full recovery occurring at $1.24. With CRV currently trading near $0.23, the proposal effectively shifts the recovery risk from the protocol to market participants betting on a price rebound.