Aave $27M liquidation incident explained: Oracle parameter misalignment, no bad debt According to Chaos Labs' analysis report, the recent $27M liquidation incident on Aave was caused by a misalignment in the CAPO oracle's parameter configuration— The ratio and timestamp updates were out of sync, resulting in the system calculating an exchange rate cap approximately 2.85% lower than the actual market rate, triggering the liquidation of about 10,938 wstETH. No bad debt was incurred by the protocol. Chaos Labs and BGD Labs have manually fixed the parameters, recovered 141.5 ETH via BuilderNet to compensate affected users, and the remaining amount will be covered by the Aave treasury. Temporary DAO compensation is estimated to be no more than 345 ETH.