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PiggyBank, a DeFi yield protocol, has admitted that a basis trading strategy involving $LAB tokens ended up costing depositors after market manipulation broke the trade. The protocol now expects a roughly 15% drawdown in its $USDC vault, with smaller declines in its SPYx and JitoSOL products.
A drawdown report by the project was released on June 10 explaining how the trade went wrong. Per a June 6 post on X from PiggyBank’s verified account, the protocol invested around $100,000, about 2% of its total assets at the time, in a basis trading strategy that involved purchasing LOCKED $LAB tokens at a discounted price through an OTC channel and opening a perpetual short as a hedge.
According to the report, $LAB then faced “violent manipulation,” thin liquidity, and deeply negative funding rates that made maintaining the short “economically irrational.” PiggyBank closed the hedge to limit further losses.
The locked $LAB position is currently valued at roughly $1.35 million using market prices, more than 13x the entry, but PiggyBank has excluded it from net asset value calculations until the first unlock on August 14 because the tokens cannot yet be sold.
The exclusion is what produced the immediate ~15% drawdown on the $USDC vault, ~12% on SPYx, and ~9% on JitoSOL.
ZachXBT flagged $LAB as a retail extraction scheme weeks before the trade
The selection of $LAB as the coin for the basis trade raised concerns immediately. Weeks before, on-chain investigator ZachXBT had highlighted the token in a comprehensive analysis released on May 14, describing it as a case study of “retail extraction.”
In that investigation, ZachXBT identified opaque private loans and OTC transactions, unilateral changes to vesting schedules, manipulative market-making activity, and a scenario in which more than 95% of the token’s supply sat under insider control.
ZachXBT identified the $LAB founders as Vova Sadkov and a co-founder known as Mark. The token launched through a Token Generation Event in October 2025. Their previous project, Eesee (ESE), had left investors feeling abandoned after the team shifted focus, ZachXBT wrote.
Among the specific issues ZachXBT documented: the $LAB team changed the cliff for Legion public sale participants from three months to nine months without consent.
He also identified on-chain links between a wallet used for $LAB loan contracts and the same address conducting public $LAB buybacks, with fund flows reaching what ZachXBT described as a founder’s personal exchange accounts on Bybit and Gate, the same accounts that had previously received deposits tied to Eesee.
OTC deals had been circulating since at least January 2026, with co-founder Mark openly soliciting buyers in a public Telegram group, according to ZachXBT. Buyers received offers via WhatsApp: loans at 5% monthly interest, OTC purchases at a 60% discount with a five-month cliff, or guaranteed discount OTC at 25%.
KOLs were pitched at an 80% discount contingent on posting promotional content. The investigator linked the $LAB infrastructure to the same unknown market maker he identified in earlier investigations into $RAVE, RIVER, SIREN, MYX, and SKYAI, calling it a consistent playbook across exchange-listed mid-cap tokens.
PiggyBank faces backlash for deploying capital into a flagged token
ZachXBT was direct in his reply after PiggyBank’s June 6 disclosure, stating that user assets had been gambled on “blatant scam coins.” His criticism drew widespread attention across the DeFi community. PiggyBank’s June 6 post drew hundreds of replies and quote tweets, signaling alarm among depositors.
The protocol has pledged compensation for affected users but has not disclosed the total losses or a timeline. Its first disclosure framed the $LAB allocation as within the strategy’s scope for mid-cap basis trades, treating it as a calculated position rather than a deviation from mandate.
As Cryptopolitan reported in April, ZachXBT identified the same coordinated market-maker pattern behind the $RAVE token collapse, in which team wallets dumped tokens during artificial price pumps. The $LAB exposure puts PiggyBank in the position of having deployed depositor capital into a token already flagged as running that same playbook.
Shift towards reimbursement plans and DeFi transparency
Whether PiggyBank releases a payout scheme with specific amounts and deadlines will shape the response of depositors. The episode underscores the case for DeFi yield protocols to disclose which tokens their strategies touch before entering positions, not after losses surface.
Funding-rate behavior on illiquid tokens like $LAB also exposes the limits of the basis-trade structure: a short that works on a deep market becomes a liability when liquidity evaporates and funding flips persistently negative.
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