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1 Million USDT Nearly Lost to Simple User Error

1 min
Updated by Kyle Baird
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In Brief

  • An anonymous user mistakenly sent $1 million USDT to Swerve's governance contract.
  • Initially these funds seemed to be permanently stuck, but with the help of Tether a refund now appears possible.
  • Binance is planning to build safeguards into its system to avoid this from happening in the future.
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While DeFi continues to develop at lightning speed, there is a steady stream of reminders of just how dangerous it can be—particularly for less experienced hands.
According to a tweet posted on Sept 8, a user mistakenly sent one million dollars worth of Tether (USDT) to the wrong address. A fork of the popular DeFi protocol, Curve, Swerve.Finance is a fair launched liquidity pool on Ethereum designed for stablecoin trading. The user in question attempted to deposit funds on Swerve but ended up sending them directly to Swerve’s governance contract. This is akin to sending an email to a no-reply address. Only in this case, there is no ‘failed to deliver’ bounceback—the user no longer possesses the email once sent, and the email itself was worth $1 million. Reversing such a transaction via Swerve is only possible if the smart contract has a function that allows it. Given that Swerve doesn’t have this functionality, the USDT deposited to the address appeared to be stuck and lost forever. Tether USDT Burn Treasury However, shortly after the incident, Tether CTO Paolo Arduino pledged to help recover the funds. Arduino urged the user to open a ticket with Tether’s customer support and indicated that if the funds were ERC20 that they “should be recoverable.” In this case, the user simply proves the funds are burnt, and Tether makes them whole. Changpeng Zhao, the founder and CEO of Binance, responded to the news by indicating that the exchange would work to build safeguards to avoid such mistakes in the future. This is not the first time that someone has sent LP funds directly to a governance contract. On Aug 30, an exchange called Gate.io reportedly made the same mistake with SushiSwap to the tune of $400k.
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Colin Adams
Colin is a writer, researcher, and content marketer with a keen interest in the future of money. His writing has been featured in numerous cryptocurrency publications, and his holdings don't amount to more than a handful of BAT.
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