PiggyBank has terminated a hedge linked to the LAB token after volatile price swings and deeply negative funding rates made the position unsustainable, causing notable impact on several vaults. The DeFi yield protocol announced that the closure will reduce net asset values, with the USDC product facing an estimated 15% drawdown. SPYx could see a 12% decline, while JitoSOL may fall 9%. These losses stem from removing locked LAB tokens from NAV calculations until they become tradeable in August.
The protocol initially placed $100,000 into the trade a month ago, representing roughly 2% of the portfolio. The strategy involved purchasing locked LAB tokens at a discount via an over-the-counter desk while shorting LAB perpetual futures to hedge price risk. However, LAB experienced what PiggyBank described as violent price manipulation, thin liquidity, and extremely negative funding rates, which escalated the cost of maintaining the short. The team decided closing the position was economically rational to prevent further damage.
On-chain investigator ZachXBT criticized the trade, accusing the protocol of using depositor funds to gamble on what he called blatant scam coins. Earlier allegations claimed LAB insiders controlled over 95% of the token supply and hid distribution details. PiggyBank’s statement did not address those claims, focusing instead on the hedge closure and accounting treatment. The protocol said it acted before the position breached internal risk limits.
The locked LAB tokens are currently valued at about $1.35 million, but they cannot be sold until August 14. PiggyBank excluded this holding from NAV because of illiquidity, leading to the reported drawdowns. Users have limited information on whether withdrawals can be made at revised values or if compensation is planned. The team promised to release a detailed report outlining next steps, trade records, risk thresholds, and plans for the unlock. Until then, the final recovery value remains uncertain.