Stream Finance Stablecoin Plunges 77% After Protocol's Fund Manager Loses $93 Million

Stream Finance announced that it suspended all withdrawals and deposits after an external fund manager lost approximately $93 million in user assets. This mismanagement triggered a drastic 77% crash in the price of its stablecoin, Staked Stream USD (xUSD), which fell from its $1 peg to about $0.50. At the time of writing, xUSD was trading at just $0.26. The DeFi research group Yields and More highlighted nearly $285 million in direct debt exposure across various lending protocols tied to Stream, indicating a significant interconnected risk within the DeFi ecosystem. The loss and subsequent depegging of xUSD reflect vulnerabilities not just in smart contracts, but also in fund management and custody issues. The operational risk highlighted by this incident underscores the importance of both human oversight and secure fund management practices in DeFi. The protocol engaged law firm Perkins Coie to investigate the incident further while attempting to withdraw all liquid assets to address creditor claims. These dynamics illustrate potential systemic weaknesses in decentralized finance that investors must be aware of.

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