PiggyBank users are facing fresh vault drawdowns after the DeFi yield protocol disclosed that a locked LAB token position moved against its hedging strategy during extreme market volatility.
PiggyBank users are facing fresh vault drawdowns after the DeFi yield protocol disclosed that a locked LAB token position moved against its hedging strategy during extreme market volatility.
The issue was initially described across social media as a possible LAB exploit, but the confirmed details point to a trading and risk-management event rather than a verified token-contract hack. PiggyBank’s own community statement said the protocol entered a $100,000 LAB position about one month ago, equal to roughly 2% of the portfolio at the time. The position came through a discounted OTC deal and was hedged with perpetual shorts.
That hedge failed to protect users once LAB’s price action became chaotic. PiggyBank said violent market movement, thin liquidity and deeply negative funding rates made the short position too expensive to maintain. The protocol closed the short to limit further downside, leaving it with a locked LAB position that it valued at about $1.35 million at current prices.
Because the position cannot be freely sold, PiggyBank is excluding it from net asset value until the first unlock on August 14. That accounting change is what hit users directly. The protocol said the latest NAV would show about a 15% drawdown for its USDC vault, about 12% for SPYx, and about 9% for JitoSOL.
ZachXBT responded sharply after PiggyBank disclosed the position, writing that “this little piggy went to the market and lost user assets gambling on blatant scam coins.” His criticism tied the PiggyBank loss to his earlier warnings around LAB’s supply structure, OTC deals and market behavior.
The comment landed because ZachXBT had already made LAB one of the market’s most controversial tokens. His earlier LAB investigation alleged opaque private loans, OTC sales, unilateral vesting changes, unknown float, market-maker coordination and more than 95% supply control behind LAB’s move to a multibillion-dollar valuation.
Those allegations remain disputed unless verified through project records, exchange data or legal findings. However, they have shaped market perception around LAB and made any protocol exposure to the token highly sensitive.
LAB had already been under heavy pressure after a 70% flash crash from its all-time high, a move that raised fresh concerns about thin liquidity, insider exposure and unstable market structure. Earlier wallet activity also showed 100 million LAB leaving Bitget-linked routes, adding to questions around circulating supply and exchange-linked flows.
The PiggyBank event shows how quickly a token controversy can become a vault-user problem. A locked OTC position may look profitable on paper when the token price rises, but it cannot be treated like liquid collateral if it cannot be sold when the strategy needs to rebalance.
That is the core issue. PiggyBank’s LAB position may be worth far more than the initial $100,000 entry price at current marks, but the position is illiquid until unlocks begin. At the same time, the hedge that was supposed to neutralize price risk became too expensive because funding costs moved sharply against the strategy.
LAB’s live market data remains volatile. The token recently traded around the low-to-mid $13 range, with more than $100 million in 24-hour volume and a multibillion-dollar market cap. Those numbers keep speculative demand alive, but they do not solve the liquidity mismatch created by a locked token position inside a vault strategy.
The strongest confirmed version of the story is not that LAB was exploited. It is that PiggyBank took exposure to a controversial, volatile and partially illiquid token, hedged it through perps, then absorbed vault drawdowns after the hedge became costly and the locked position was removed from NAV.
That distinction matters. A smart-contract exploit would imply code failure, stolen assets or unauthorized token creation. PiggyBank’s statement instead points to position construction, liquidity, funding rates and risk controls.
The next important document will be PiggyBank’s promised detailed report. Users will need clear answers on the OTC terms, position sizing, hedge execution, funding losses, NAV treatment, counterparty details, unlock schedule and whether user funds were exposed to risks that matched the advertised vault strategy.
For now, the LAB rumors have cooled into a more specific story: no confirmed exploit, but real user drawdowns, a locked token position, public criticism from ZachXBT and a DeFi vault forced to explain why a controversial LAB trade became part of its risk profile.
The post ZachXBT Slams PiggyBank After LAB Trade Hits User Vaults appeared first on Crypto Adventure.
