A massive leveraged crypto trade unraveled dramatically on the decentralized derivatives platform Lighter, leaving one large trader — commonly referred to as a “whale” — with an $8.2 million loss.
The incident unfolded in the ARC perpetuals market, where the trader had built an oversized long position over several days. As the bet grew, total open interest in ARC climbed to nearly $50 million, with around 600 traders and market makers taking the opposite side of the trade.
When ARC’s price began to fall around 6:00 pm ET on Wednesday, the highly leveraged position started to collapse. Roughly $2 million of the position was liquidated directly through the order book. The remaining exposure was transferred into Lighter’s Liquidity Provider Pool (LLP), categorized under a high-risk strategy framework designed to contain systemic damage.
Auto-Deleveraging and Backstop Liquidity Prevent Larger Fallout
As losses mounted, Lighter activated its auto-deleveraging (ADL) mechanism. This process partially closed profitable short positions to safely unwind the whale’s massive long exposure and maintain market stability.
At its peak, the LLP temporarily absorbed around 200 million ARC tokens — valued at approximately $14.7 million — before further reductions were made as the price continued to decline.
Despite the size of the liquidation event, the platform’s built-in safeguards limited broader damage. The whale ultimately lost about 8.2 million USDC, while liquidity providers suffered losses of just $75,000. Meanwhile, short traders who had taken the opposite position ended up profitable.
According to Lighter, the ARC market was isolated within its own risk bucket. This structure prevented the losses from spilling over into the platform’s broader liquidity pool, effectively protecting other markets and participants.
Lighter Introduces New Risk Caps After ARC Liquidation
Following the incident, Lighter implemented tighter risk controls to prevent similar situations in the future.
The platform introduced a $40 million open interest cap for ARC perpetuals and shifted the pair to a capped liquidity strategy backed by approximately $100,000 in allocated USDC capital. If that liquidity threshold is reached, the system will now automatically transition into auto-deleveraging mode to reduce risk exposure.
Lighter also indicated that similar safeguards could be extended to other volatile assets on the platform.
The event comes amid ongoing concerns about price manipulation and risk management across decentralized trading venues. In August last year, traders alleged that several whales manipulated the price of Plasma (XPL) on Hyperliquid, causing the token to surge more than 200% within minutes.
Separately, in June, the DeFi protocol Resupply suffered a $9.6 million loss after an attacker exploited pricing mechanisms in its wstUSR market through integration with the synthetic stablecoin cvcrvUSD.
