DeFi Protocol Stream Finance Halts Services After $93M Asset Loss Reported

Stream Finance, a DeFi protocol focused on providing capital efficiency, announced that it has lost $93 million due to issues with how an external manager handled its funds. Following the discovery, the protocol has paused all deposits and withdrawals. Legal experts from Perkins Coie LLP have been engaged and are currently investigating the situation. 

The project confirmed the massive loss via an official statement on its official X handle. The development follows a sharp decline in the value of its xUSD stablecoin.

$93M Mismanagement Disclosed

Yesterday, Stream Finance faced significant challenges during a period of market volatility in the decentralized finance (DeFi) sector. Users noticed differences in the total value locked (TVL) on the platform. The company reported having $160 million in deposits, while DefiLlama estimated it to be $520 million. The discrepancy raised concerns among users.

Later that day, an external manager reported a $93 million loss due to mismanagement in funds. As a result, Stream Finance immediately ceased all services. Stream Finance, founded in 2024, aims to increase returns by employing strategies that reinvest earnings into borrowed positions, such as lending and market making. 

Users can deposit USDC to receive xUSD, a stablecoin expected to yield a 14% annual percentage yield (APY), backed by overcollateralized synthetic assets like xBTC and xETH. Sources indicate that there was no evidence of hacking; the issues appeared to stem from a loss of trust rather than exploitation.

Impact on Users and the Ecosystem

Following the development, the platform’s stablecoin, xUSD, decreased in value by 70%. The changes in leveraged positions for xBTC and xETH led to numerous liquidations on platforms such as Morpho and Euler, thereby creating additional bad debt in the system. Users holding xUSD are experiencing temporary losses due to liquidity pools running low.

Although trading volume has risen to $1.59 million, the market capitalization of xUSD has decreased to $95.6 million. Estimates indicate that over $160 million in locked deposits could lose 10% to 30% of their value during redemption because of the complexities in releasing collateral. Overall, DeFi activity slowed down, reflecting user apprehension. Stream Finance has, however, promised to share updates through X and Discord.

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