Stream Finance Freezes Withdrawals After $93M Loss Amid Fraud Concerns

DeFi platform Stream Finance suspended all withdrawals and deposits on Nov. 3 after an external fund manager disclosed a loss of approximately $93 million in company assets. The platform retained attorneys Keith Miller and Joseph Cutler of law firm Perkins Coie LLP to investigate the incident.

Stream Finance announced in a Nov. 3 statement that it is withdrawing all liquid assets and expects to complete the process in the near term. The company provided no timeline for resuming withdrawals or identifying the external fund manager responsible for the loss.

Suspicious Growth Pattern Preceded Collapse

Stream’s xUSD vault expanded from $40 million to nearly $400 million in recent months while displaying a flat 15% yield throughout the growth period, according to web3 lawyer Iptisha.

The lawyer noted that onchain yields typically decrease as more depositors split profits and fluctuate based on market conditions, suggesting returns were being manually set or averaged from offchain strategies.

Stream Finance operates without a comprehensive Proof of Reserve or transparency dashboard, relying instead on a Debank bundle showing onchain positions, according to Chaos Labs founder Omer Goldberg. Following the Nov. 3 announcement, xUSD depegged 25% from its target price before partially recovering.

Contagion Threatens $285M Across DeFi Protocols

An estimated $284.96 million in outstanding loans are secured by Stream’s xUSD, xBTC, and xETH collateral across multiple DeFi lending platforms, according to pseudonymous analyst YAM. The collateral backs loans on protocols including Euler, Silo, and Morpho across Ethereum, Arbitrum, Avalanche, Plasma, and Sonic networks.

Users deposit Bitcoin BTC $104 196 24h volatility: 2.1% Market cap: $2.08 T Vol. 24h: $86.77 B , Ethereum ETH $3 549 24h volatility: 2.0% Market cap: $428.57 B Vol. 24h: $50.72 B , and dollars to mint these derivative tokens, which are then used as collateral on other platforms.

Elixir Network’s deUSD stablecoin has $68 million in USDC USDC $1.00 24h volatility: 0.0% Market cap: $75.41 B Vol. 24h: $12.83 B lent to Stream against xUSD collateral, representing 65% of deUSD’s total backing. Elixir claimed it holds full redemption rights at $1 for its lending position, but Stream told the company it cannot process payouts until attorneys determine creditor priority, according to YAM’s analysis. The exposure puts Elixir at risk if Stream cannot recover funds, similar to recent stablecoin depeg events affecting the $280+ billion stablecoin market.

The largest exposed curator is TelosC with $123.64 million in loans secured by Stream assets, followed by Elixir at $68 million and MEV Capital at $25.42 million. MEV Capital’s xUSD market on Arbitrum has fallen below liquidation thresholds with borrow rates reaching 88% at 100% utilization. The positions have not liquidated because many markets use fundamental value oracles rather than spot prices, which delays default risk in DeFi lending strategies.

Stream Finance provided no information about the external fund manager’s identity, investment strategy, or custody arrangements.

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