Stream Finance Suffers $93 Million Fund Manager Loss, XUSD Stablecoin Peg Crashes to $0.24

DeFi Protocol Suspends Operations, Launches Legal Investigation as Investors Face Sharp Collateral Contagion

TL;DR

• Stream Finance disclosed a $93 million loss tied to an external fund manager, freezing all deposits and withdrawals.
• Its stablecoin XUSD collapsed to as low as $0.24, wiping out confidence and liquidity across connected protocols.
• Legal counsel from Perkins Coie LLP is leading the investigation amid mounting concerns about leveraged DeFi risk and transparency.

Stream Finance was rocked this week by a $93 million loss attributed to an external fund manager, forcing the DeFi protocol to suspend deposits and withdrawals and triggering one of the sharpest collapses in the decentralized finance ecosystem this quarter. The platform confirmed that its dollar-pegged stablecoin, XUSD, cratered to roughly $0.24, far below its intended one-to-one value, erasing investor confidence and exposing structural risks hidden behind complex yield-looping strategies. The event sent shockwaves through liquidity pools and lending markets that used XUSD as collateral, pressuring both stablecoin markets and the broader crypto price index.

Stream Finance said it has engaged law firm Perkins Coie LLP to conduct an independent legal investigation, naming partners Keith Miller and Joseph Cutler as lead attorneys on the case. The team stated it is “actively withdrawing all liquid assets and expects the process to be completed in the near term,” promising ongoing transparency as it navigates asset recovery and legal procedures. 

According to its internal disclosures, the protocol previously held around $160 million in user deposits and $520 million in total assets deployed across strategies, including recursive-looping mechanisms that multiplied exposure. Analysts now estimate that more than $280 million in combined loans and collateral positions could be entangled within the network’s token ecosystem.

The fund manager loss appeared to surface late Sunday before Stream Finance made a public announcement early Monday, leading to a rapid market repricing. Within hours, XUSD collapsed 77%, while broader DeFi valuations and the coin market cap of related tokens slid as liquidity providers rushed to unwind positions. The platform’s founder, Omer Goldberg, acknowledged that the depeg worsened after last week’s Balancer AMM exploit, which siphoned more than $100 million and rattled liquidity conditions across several chains. Blockchain security executives emphasized that the Stream Finance case highlights operational vulnerabilities beyond smart-contract flaws—namely, the risks tied to human fund management and off-chain custody.

Industry watchers noted that the ratio between the reported $93 million loss and $160 million in user deposits implies significant leverage or rehypothecation within Stream Finance’s strategies. XUSD’s plunge not only eroded direct holders’ balances but also jeopardized secondary protocols where the asset was used as collateral, including lending and liquidity pools on networks such as Plume, Arbitrum, and Plasma. The sudden breakdown rippled through risk dashboards and algorithmic trading models tracking the broader crypto price, underscoring how intertwined decentralized financial systems have become.

Legal and technical teams are now racing to reconstruct the flow of funds and identify whether negligence, market manipulation, or mismanagement caused the exposure. The firm’s statement signaled an intent to update the community as the inquiry progresses, but users remain locked out of withdrawals pending audit completion. Analysts say the depeg will serve as a new stress test for DeFi protocols relying on off-chain fund managers to secure on-chain stability—an arrangement increasingly under scrutiny as investors re-evaluate trust, leverage, and transparency across the fast-evolving digital-asset landscape.

Suilend has paused deposits and withdrawals in the Elixir Isolated Market following significant losses reported by Stream Finance. 

Suilend is demanding immediate loan repayment from Elixir as part of precautionary measures, while Elixir claimed it had full redemption rights at $1 for its lending position with Stream and asserts that its deUSD remains fully backed as it begins unwinding its lending activities.

This article has been refined and enhanced by ChatGPT.