Aave saw roughly $27 million in liquidations over the past 24 hours after a temporary CAPO oracle misconfiguration pushed down the reported value of wstETH. The issue created an estimated 2.85% gap in the oracle feed, enough to push some E-Mode borrowing positions into liquidation even though their collateral had not actually deteriorated by that amount.
Chaos Labs first flagged the unusual jump in liquidations and traced the problem to Aave’s oracle setup. Aave founder Stani Kulechov later confirmed on X that the incident did not create bad debt. He also said users affected by the event would be reimbursed.
How CAPO entered an inconsistent state
CAPO, short for Correlated Asset Price Oracle, is used to protect Aave against price manipulation and inflation attacks when pricing related assets. According to Chaos Labs founder Omer Goldberg, the system combines off-chain calculations from the Chaos Oracle with on-chain contract logic, and its price cap is derived from a ratio and elapsed time.
The problem came from a mismatch between the snapshot ratio and the snapshot timestamp. That mismatch caused the oracle to undervalue wstETH by around 2.85%. For borrowers using E-Mode, that was enough to change account health metrics and trigger automatic liquidations. The collateral itself was still there. The oracle input was not aligned.
Goldberg said the CAPO contract limited exchange-rate growth to 3% over three days. When the latest snapshot ratio moved above that cap, the system fell back to a lower value while keeping an outdated timestamp. In his explanation, the ratio was rate-limited but the timestamp was not, and once the two moved out of sync, the oracle entered an inconsistent state that artificially depressed the price feed.
Fixes were applied and funds are being recovered
Aave and Chaos Labs moved quickly after identifying the issue. Borrow caps were reduced, and the snapshot ratio was manually aligned so pricing could return to normal. Kulechov said 345 ETH in liquidation windfall went to liquidators, while the protocol itself did not take a direct loss.
A reimbursement process is now being organized for affected users, with part of the funding expected to come from fees previously earned from liquidations. Aave also said 141 ETH has already been recovered through BuilderNet refunds. The incident was short-lived, but it showed how sensitive DeFi lending systems remain to oracle synchronization: a small mismatch in pricing data and timestamps can cascade into large on-chain liquidations very quickly.