AlphaFi Winds Down After Oracle Error Creates Bad Debt on Sui

AlphaFi is winding down its Sui-based DeFi operation after an oracle configuration error involving ALPHA created undercollateralized loans on AlphaLend.

The ALPHA oracle misconfiguration affected the collateral calculations used by the lending market, leaving AlphaLend with bad debt. The shortfall was fully covered with support from the Sui Foundation, protecting depositor balances from losses.

New deposits and borrowing have been disabled as AlphaFi moves into maintenance mode. Repayments and withdrawals remain available while users close positions and remove assets from the protocol.

AlphaLend Had More Than $100 Million Supplied

The shutdown comes only weeks after AlphaLend had grown beyond $100 million in supplied assets, spanning SUI, stablecoins and Bitcoin-related assets, with borrowing markets also supporting Sui-native tokens including WAL and DEEP.

AlphaFi had previously reached $160 million across its wider ecosystem, including $86 million on AlphaLend, $46 million in stSUI and $28 million across yield vaults. The protocol also reported more than 50,000 monthly active users across AlphaFi and AlphaLend during that growth period.

The oracle error affected the pricing used to determine whether AlphaLend positions remained sufficiently collateralized. Once the incorrect ALPHA valuation created loans whose collateral no longer adequately covered their debt, the protocol was left with a balance-sheet shortfall that required outside support.

No new lending activity is being accepted during the wind-down.

Withdrawals Remain Open During Wind-Down

Users can continue withdrawing assets while AlphaFi unwinds its remaining positions. Slush users with exposure through AlphaFi strategies were also advised to exit affected positions rather than leave funds in products being discontinued.

AlphaFi’s closure follows separate security failures across Sui DeFi this year. Scallop lost roughly 150,000 SUI after an attacker targeted a deprecated contract in April, while Aftermath Finance paused its protocol following a $1.1 million perpetuals exploit later that month.

AlphaFi’s incident involved a different failure mechanism. The losses originated from incorrect oracle configuration and the resulting undercollateralized loans rather than a reported drain of protocol wallets.

AlphaLend is no longer accepting deposits or new loans, while repayments and withdrawals remain active as AlphaFi completes the wind-down. The bad debt created by the ALPHA pricing error has been covered in full.

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