Aave Protocol Hit by $27 Million Liquidation Event Due to Configuration Error

Aave's decentralized finance (DeFi) protocol was rocked by a significant liquidation event on March 10, 2026. The incident was caused by a configuration error in the CAPO risk oracle, which undervalued wrapped stETH (wstETH) by 2.85% relative to the market.

The result was a massive liquidation of user positions over a 24-hour period, totaling approximately $27 million. While the incident may have caused significant losses for users, Chaos Labs has moved quickly to address the issue and has confirmed that every affected user will receive full compensation for their losses.

CAPO is a security module used by Aave to prevent price manipulation of yield-bearing assets like wstETH. In this case, the error in the CAPO risk oracle led to the undervaluation of wstETH, triggering the liquidations. However, it's worth noting that the protocol incurred no bad debt and the fund pools remained intact throughout the incident.