Trader Opens $4 Million Short on TUSD Using Aave V2

An Ethereum user is betting big against the TrueUSD (TUSD) stablecoin after the issuer was forced to pause mints and redemptions through Prime Trust.

On-chain data shows one trader deposited 7.5 million USDC as collateral on DeFi lending platform Aave’s Version 2.  The trader then used this to borrow 4 million TUSD and immediately sell it for USDC – a common strategy used to take on a short position on an asset. 

Earlier this month, the stablecoin issuer announced that minting TUSD via its banking partner Prime Trust would be paused until further notice. Prime Trust, a fairly large Nevada-based crypto custodian, was recently issued a cease-and-desist order from the state regulator who alleged the firm was insolvent.

TrueUSD (TUSD) maintains multiple USD rails for both minting and redemption. This means that alternative TUSD minting and redemption processes are live and available on these USD rails.

— TrueUSD (@tusdio) June 23, 2023

TrueUSD assured users that it was not affected by the situation and that it had no exposure to Prime Trust. The stablecoin issuer claimed to have multiple USD rails for minting and redemption.

Still, market participants were skeptical of the stablecoin issuer’s statements evidenced by their recent trading activity. Aside from the anonymous trader’s multi-million short position, data from Aave v2’s pools show that traders are paying up to 50% APY to short TUSD.

people try to redeem tusd and it just gets reminted to them a couple of days later lmao pic.twitter.com/a6kxTuXPBT

— alto | dollar.eth (@etheraltog) June 23, 2023

According to a report from CoinDesk last week, citing data from blockchain analytics firm Arkham Intelligence, Binance crypto wallets hold as much as 90% of TUSD’s $3.1 billion market cap.

Data also shows that Binance minted $1 billion TUSD on the Tron blockchain over the week, before announcing that they would be extending zero-fee trading on all TUSD pairs from June 30.