PiggyBank, a Solana-based yield protocol, is facing backlash over a $100,000 LAB token trade that has turned into a much larger problem for depositors. The protocol said it bought discounted locked LAB about a month ago, with the position representing roughly 2% of the portfolio at the time. On paper, that stake is now worth $1.35 million. It cannot be sold yet, because the tokens remain locked until August 14.
The hedge broke down and the locked tokens were removed from NAV
The original strategy was a basis trade: buy locked LAB at a discount, then hedge price risk through perpetual short positions. That setup fell apart as LAB saw sharp price swings and liquidity thinned out. Funding on the short side turned deeply negative, forcing PiggyBank to pay heavily to keep the hedge open.
It eventually closed the shorts. What remained was an illiquid LAB position showing a large paper gain but offering no immediate exit. PiggyBank then excluded the LAB stake from NAV, or net asset value, saying this was the “fairest and most transparent” treatment. For users, the effect was immediate. The value shown in several vaults dropped.
USDC vault down about 15%, other products also fell
According to the figures cited by the protocol, the USDC vault fell roughly 15%, SPYx declined about 12%, and JitoSOL slipped around 9%. PiggyBank said the position could still recover value after the August unlock and said a full report would be released next week.
The episode has drawn attention to the risk profile inside yield products. Depositors often expect relatively conservative strategies. In this case, part of the capital was used for a trade tied to a mid-cap token with limited liquidity. Once the hedge failed, the damage flowed through to vault valuations. The initial position was small. The impact was not.
ZachXBT attacks the decision and points back to earlier LAB warnings
On-chain investigator ZachXBT publicly criticized PiggyBank, accusing it of exposing user deposits to a highly speculative asset. He said he had already raised concerns about LAB in May. The issues he listed included opaque private loans and OTC deals without public disclosure, unexplained changes to vesting schedules, suspected coordination between market makers, and token supply concentrated in a small number of wallets.
PiggyBank described the trade as a “mid-cap basis trade.” That type of strategy is used in professional markets, but it depends on workable liquidity and manageable hedge costs. LAB did not offer either. Once the short hedge was closed, users were left with exposure to a volatile locked position they never selected themselves, and that has become the center of the controversy.