Stream Finance Suspends Platform Amid $93M Loss

Summary: Stream Finance, a decentralized finance (DeFi) platform, has paused all deposits and withdrawals following a significant $93 million loss discovered by an external fund manager. The company's team is currently investigating the issue with legal assistance. During this period, their collateralized stablecoin, Staked Stream USD (XUSD), has also experienced a sharp decline in value.

Key Takeaways

Stream Finance has suspended deposits and withdrawals due to a reported $93 million loss.
An external fund manager discovered the loss, prompting the company to hire legal counsel for further investigation.
The platform's stablecoin, XUSD, has significantly depegged and is trading at approximately $0.51.
The team has acknowledged issues regarding discrepancies in reported total value locked (TVL) figures with the data service DefiLlama.

Decentralized finance platform Stream Finance has announced that it has paused all deposits and withdrawals. This decision follows a revelation by an external fund manager, who uncovered a loss of $93 million in assets under management. The Stream Finance team shared an update on X (formerly Twitter) on Monday, stating that the fund manager reported the loss a day prior, and the project has since engaged the legal firm Perkins Coie to investigate the situation.

The platform communicated, “We are actively working to withdraw all liquid assets and anticipate that this process will be completed shortly. We will keep our users informed with regular updates as we obtain more information.”

Source: Stream Finance

While Stream Finance conducts its investigation, the platform has halted all withdrawals and will not accept any new deposits.

Stream Finance pauses platform after finding $93M loss

XUSD Experiences Dramatic Price Drop

Stream Finance operates as a “recursive looping” yield-focused DeFi platform and offers a collateralized stablecoin known as Staked Stream USD (XUSD). On Sunday, prior to Stream Finance's announcement, XUSD started to lose its dollar peg as users expressed concerns about the suspension of operations without prior notification from the team.

Omer Goldberg, founder of Labs, posted about 10 hours before Stream's announcement, indicating that XUSD had “began to depeg materially below its target range” due to a significant exploit exceeding $100 million on the automated market maker Balancer. As of the latest updates, the price of XUSD has plummeted to around $0.51, according to data from CoinGecko.

XUSD’s price over the last 24 hours. Source: CoinGecko

On Friday, Stream Finance responded to community inquiries regarding discrepancies between the total value locked (TVL) reported on its website and the figures provided by the popular data aggregator DefiLlama. The platform stated, “DefiLlama has decided that recursive looping is not considered TVL based on their own definitions. We disagree with this assessment, but to maintain transparency, we have now clarified the differences between user deposits (approximately $160 million) and total assets deployed across strategies (around $520 million).”

This situation highlights the importance of understanding the mechanisms through which protocols generate yield, as well as the risks associated with complex DeFi strategies that may not align with standard definitions, according to Minal Thurkal, head of DeFi Ecosystem Growth at CoinDCX.

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