Stream Finance Suspends Withdrawals After Suffering $93 Million Loss, Investigation Launched
Decentralized finance platform Stream Finance has suspended deposits and withdrawals after suffering a significant loss of $93 million, sparking concerns across the DeFi community and prompting a formal investigation. The protocol, known for offering capital-efficient strategies by combining traditional financial instruments with DeFi innovations, announced that the losses came from an external fund manager monitoring its assets.
The external fund manager’s loss has led to a temporary suspension of all withdrawals and deposits on the platform, with pending deposits not being processed at this time. Stream Finance has retained Perkins Coie LLP, a leading law firm in the blockchain space, to lead the investigation into the incident. Attorneys Keith Miller and Joseph Cutler will oversee the investigation, reflecting the firm’s focus on transparency and governance.
Stream’s Stablecoin XUSD Loses Peg, Sparking Widespread Concern
The platform’s native stablecoin, StakedStreamUSD (XUSD), lost its peg following the disclosure and fell to around $0.50, adding to user concerns. The depegging has not only affected XUSD holders but also other synthetic tokens under the Stream umbrella, such as xBTC and xETH. Market participants and investors who rely on the protocol for trading and long-term investments have expressed concerns about the sudden freeze, which denies them access to their assets.
A pseudonymous analyst named YAM noted that the situation could have far-reaching implications, pointing out the complexities in settling claims between holders of xUSD, xBTC, xETH, and the lenders secured by these tokens. Additionally, he warned of indirect exposure to the event through other stablecoin vaults such as Elixirs deUSD and Treeves scUSD. YAM estimates that the total outstanding debt tied to stream assets could exceed $280 million, excluding the burden of interconnected lending platforms.
Estimated Debt Exposure and Affected Protocols
Potentially affected protocols include Euler, Morpho, and Silo, all of whose credit markets are linked to stream tokens. The incident has highlighted the risks associated with complex DeFi systems and may reignite debates about oversight, third-party fund managers, and protocol transparency in crypto finance. Stream Finance was founded in early 2024 with the aim of providing yield-generating DeFi services via activities such as credit arbitrage, secured market making, and incentive farming.
Users typically deposited USDC in exchange for XUSD, which was designed to provide stable returns. With the future of the protocol now uncertain, attention turns to the outcome of the investigation and whether affected users will be compensated. The incident occurred following the Balancer Protocol’s recent $116 million debit, further emphasizing the need for robust risk management and transparency in DeFi.
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