Azernews.Az

The Moonwell cryptocurrency exchange lost nearly $2 million due to a technical glitch in its automated system, which uses artificial intelligence algorithms to set prices and execute transactions, AzerNEWS reports.

The incident occurred on February 15, following a system update intended to improve the accuracy of crypto asset pricing. However, a misconfigured component began transmitting the wrong price for the cbETH digital asset.

Instead of the actual market value of over $2,000, the system “saw” the price as roughly $1. The platform then interpreted this as a sharp drop in the value of user deposits, rendering them insufficient to cover loans.

Trading bots, programs that automatically execute transactions faster than any human, quickly exploited the error. They purchased cryptocurrencies at the mispriced rate and seized user deposits that were actually worth thousands of dollars.

Within minutes, more than 1,000 units of cbETH were withdrawn from the platform. Users lost their collateral, while their debts to the exchange remained. The total estimated damage is around $1.8 million.

Moonwell’s team discovered the issue shortly after it occurred and attempted to halt operations. However, internal management rules—requiring special approvals for urgent system changes—delayed intervention, preventing a complete stop to the losses.

The incident has sparked debate in the crypto community. Experts warn that as financial platforms increasingly rely on artificial intelligence, oversight and code verification systems often lag behind the rapid deployment of these technologies.

Some observers note that such glitches, while costly, also expose vulnerabilities in decentralized finance systems and may push exchanges toward stricter automated safeguards. Others jokingly call these incidents “AI going rogue,” highlighting the unpredictable side of trusting algorithms with real money.