Lilypad Smoking

I teach a camp where we make interactive stuffed monsters with the Lilypad Arduino USB. I am having a problem where as soon as I plug in a lipo battery, the Lilypads start smoking. I have taught this for years and never seen the problem.

I know it is not a short circuit because the projects work fine off of the usb cable and computer. I am using a 3.7V 500mAh Lipo battery. I can then still run the lilypad again off the USB but it looks like it fries a component where the battery circuit will never work again. You can see the IC near port 11 bubbles up.

Is this a manufacturing problem? Is there a code issue?

Where did you get your battery from? Some non sparkfun batteries are wired backwards and will burn out this exact chip. Are the red an black wires in the same place on the suspect battery from known good ones?

If you’re lucky, you’ve only lost the ability to recharge batteries with the board and it will still function correctly but it’s possible a backwards battery will kill all the chips on the board.