A major trader lost $8.2 million on the Lighter exchange after a margin position on perpetual contracts for the ARC token collapsed.
This incident forced the platform to utilize reserve liquidity and activate its auto-deleveraging mechanism (ADL).
We had the first battle test of LLP Strategies in the last several hours. TLDR: it worked as expected and protected LLP holders as well as traders. Deep dive in this thread.
— Lighter (@Lighter_xyz) February 26, 2026
According to the platform, the trader had been building a long position for several days, increasing the total open interest in the coin to $50 million. On the other side, around 600 traders and market makers had opened short positions.
The situation escalated when the price of ARC dropped sharply. Positions worth about $2 million were liquidated directly in the exchange order book. The remaining volume was transferred to the Lighter liquidity pool (LLP), where it was managed under a high-risk strategy.
To address the issue, the platform activated ADL: some profitable shorts were forcibly closed, allowing the system to safely unwind the trader's losing position.
At its peak, LLP briefly absorbed around 200 million ARC ($14.7 million), after which the position continued to decrease as prices fell further.
Risk Limits
Despite the massive liquidation, liquidity providers suffered minimal losses, totaling only about $75,000.
Lighter explained that trading in ARC occurred in an isolated environment, so the incident did not affect the exchange's main liquidity pool. Short traders who held positions against the major trader ended up in profit.
“In the end, the major trader lost about $8.2 million USDC, LLP lost $75,000, while the short traders who dared to go against this position ended up in the black,” the DEX team summarized.
Following the incident, Lighter implemented additional restrictions on the ARC market. In a pop-up notification on its website, the platform announced a limit on open interest set at $40 million.
The pair was also moved to a limited liquidity strategy with a dedicated capital of about $100,000 in USDC. If this amount is exhausted, the system will automatically switch to ADL to close risks.
Developers noted that similar limits could be introduced for other assets as well.
Recall that in November, the Hyperliquid exchange suspended deposits and withdrawals amid suspicions of price manipulation involving the meme coin POPCAT.
At that time, one trader opened a long position of $30 million across 19 wallets. His actions triggered mass liquidations and caused the platform's liquidity pool to incur a loss of $4.9 million.