Stream Finance Pauses Withdrawals After $93 Million Loss

Stream Finance announced the suspension of deposits and withdrawals following an external fund manager's disclosure of a significant loss of approximately $93 million in the protocol's funds. The team has engaged legal representatives to investigate the matter.

Key Takeaways

Stream Finance halted all deposits and withdrawals due to a reported loss of $93 million.
The protocol has hired legal experts to investigate the situation.
The stablecoin XUSD experienced a sharp decline, falling 58% from its $1 peg.
The loss is attributed to a decline in trust rather than a confirmed exploit, raising concerns over leverage.

Stream Finance

Stream Finance Suspends Deposits and Withdrawals

Stream Finance has temporarily suspended deposits and withdrawals after an external fund manager revealed a considerable loss of about $93 million in the protocol’s funds. This announcement was made on Tuesday.

The Stream Finance team stated that they have engaged Keith Miller and Joseph Cutler from law firm Perkins Coie to conduct a thorough investigation into the incident.

“We are actively working to withdraw all liquid assets and expect to complete this process soon,” the company mentioned, assuring users that further updates will be provided as more information develops.

Until the investigation clarifies the cause and extent of the loss, all deposits and withdrawals will remain paused. The statement clearly noted, “Any pending deposits will not be processed at this time.”

XUSD Drops as Traders Exit

The news caused significant negative sentiment within the protocol’s ecosystem. Following the announcement, the staked stablecoin XUSD lost its $1 peg, dropping as much as 58% within just 24 hours. Traders reported heavy selling on Arbitrum-based exchanges as confidence diminished.

The disclosure was made around 12:45 PM UTC, coinciding with reports of a large exploit on Balancer, although these events appear unrelated. The timing exacerbated anxiety across segments of DeFi, causing users to take defensive measures.

Within hours, high-volume XUSD-to-USDC swaps on platforms like Camelot and Uniswap reduced XUSD’s value from $1 to $0.92. As Stream confirmed that deposits and withdrawals were frozen pending the investigation, buying interest diminished and the price fell further.

From 6:00 PM UTC on November 3 to 2:00 AM UTC on November 4, the pressure from liquidations and arbitrage transactions drove XUSD down to approximately $0.43.

Trust Concerns Rather Than Confirmed Exploit

Observers noted that the steep decline in value resulted from a loss of trust rather than a definitive failure of the smart contract. They highlighted that trading activity on Arbitrum had a significant effect on this price movement and that, at the time of writing, there was no conclusive evidence of a protocol exploit.

Concerns about the protocol's backing intensified on social media. One user suggested that on-chain data indicated about $170 million in assets backing approximately $530 million in outstanding loans, implying a leverage ratio exceeding four times. However, these figures could not be independently validated in real-time.

Stream Finance launched in early 2024 with a focus on capital-efficient strategies that combine DeFi with traditional market techniques. Users deposit USDC into a vault and receive XUSD, aiming to generate yield through activities like lending arbitrage, incentive farming, and hedged market making. The protocol has also collaborated with external managers when internal resources are inadequate.

While this model initially fueled rapid growth for Stream Finance in 2025, the current reliance on external counterparties has become a focal point of the ongoing investigation.