So, I put up 10BTC as collateral to get 110LNA - worth 11BTC - on the promise that I'll pay back 120LNA - worth 12BTC.

I sell the LNA for 11BTC worth of dollars. A meteor comes and destroys the price of LNA, sending it to a penny. When my loan is due, I buy 120LNA for a buck twenty and pay it back. I keep all of the 11BTC worth of dollars, having essentially bought them for a dollar.

Something like that? Seems like it fucks lenders more than holders, but I'm guessing that a lot of holders use some trickery to act as lenders as well. Neat scam.