Ross Ulbricht Suffers $12 Million Loss in Memecoin Trading Error
Ross Ulbricht's $12 Million Loss in Memecoin Trading Error
Ross Ulbricht, the founder of the infamous Silk Road marketplace, or someone managing his crypto wallets, recently incurred a $12 million loss due to a trading error involving the ROSS memecoin. The incident occurred while attempting to provide liquidity on Raydium, a decentralized exchange (DEX).
The Trading Error and Its Consequences
The mistake happened when the liquidity pool for the ROSS token was set up at an incorrect price. This allowed a maximal extractable value (MEV) bot to acquire $1.5 million worth of the token, representing 5% of its total supply. The bot then sold these tokens into the existing pool for a profit.
The wallet associated with Ulbricht repeated the error, leading to an additional loss of $10.5 million, approximately 35% of the token's supply. The total loss amounted to $12 million.
The Role of MEV Bot and Market Maker Models
The error occurred when Ulbricht's wallet tried to add single-sided liquidity using Raydium's Constant-Product Market Maker (CPMM) model instead of the intended Concentrated Liquidity Market Maker (CLMM) model. This mistake enabled the MEV bot to capitalize on the opportunity, selling the tokens for over $600,000. As a result, the ROSS token's value plummeted by 90%.
Remaining Holdings and Campaign Ties
Despite the significant losses, the wallet addresses tied to Ulbricht still hold about 10% of the ROSS token supply, valued at approximately $200,000. These wallets are linked to FreeRoss.org, a campaign advocating for Ulbricht's release from prison. Notably, Ulbricht's Solana donation address had previously received half of the ROSS supply from the token's developer.
Background on Ross Ulbricht
Ross Ulbricht was convicted for operating Silk Road, an online black market that utilized Bitcoin for transactions, and was sentenced in 2015. He was pardoned by former US President Donald Trump in January 2023, fulfilling one of Trump's campaign promises related to cryptocurrency.
This incident highlights the risks and complexities of decentralized finance (DeFi) and the potential for errors in cryptocurrency trading.
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