Ross Ulbricht, the founder of the notorious Silk Road marketplace, recently made headlines again—not for his controversial past or his pardon by former President Donald Trump, but for a staggering $12 million loss incurred while trading a memecoin on the platform Pump.fun.
Ross Ulbricht $12 Million Mistake
On January 29, Ulbricht, or an individual with access to his Solana wallet, reportedly attempted to manage liquidity for ROSS tokens, a meme coin created by his supporters to raise funds following his release.
Ross Ulbricht received 50% of the total supply of these tokens, which were designed to generate financial support in the wake of his pardon. Instead of liquidating his holdings all at once, he sought to add liquidity gradually on Raydium, a decentralized exchange (DEX) operating on the Solana blockchain.
However, Ulbricht’s attempt to provide liquidity was marred by a critical error. In setting up the liquidity pool, he mistakenly utilized a Constant-Product Market Maker (CPMM) model instead of the more refined Concentrated Liquidity Market Maker (CLMM) model.
The CPMM model, which is the standard for automated market makers, does not allow liquidity providers to set specific price ranges for their trades. As a result, Ulbricht’s tokens became available for trading at an unfavorable price, leading to immediate and unintended market consequences.
ROSS Tokens Plunge 90% After MEV Exploitation
This misconfiguration attracted the attention of a maximal extractable value (MEV) bot—an algorithm designed to scan blockchain transactions for profitable opportunities and execute trades at lightning speed.
The bot seized the moment, purchasing $1.5 million worth of ROSS tokens at a steep discount, then promptly reselling them at a profit into the existing liquidity pool. The rapid exploitation of the mispriced tokens caused a significant price drop, triggering a cascade of losses.
In an effort to rectify the situation, Ross Ulbricht attempted to fix his liquidity setup but fell into the same trap, ultimately losing an additional $10.5 million. This brought his total losses to a staggering $12 million as the MEV bot continued to exploit the misconfigured liquidity.
The fallout from these transactions resulted in a 90% crash in the token’s price, eroding a significant portion of its market value.
Despite these setbacks, Ross Ulbricht retains 10% of the ROSS token supply in another wallet, now correctly configured on Raydium’s CLMM pools. These remaining holdings are estimated to be worth around $200,000, a mere fraction of the original investment.
Featured image from DALL-E, chart from TradingView.com