Stream Finance confirmed a major loss of about $93 million in fund assets managed by an external partner. The project has hired top law firm Perkins Coie LLP to lead an independent investigation and has suspended all deposits and withdrawals pending review.
The news comes just a day after its staked stablecoin, XUSD, depegged by 22.6% in 24 hours, sparking wide concern across the DeFi community.
$93 Million Loss Disclosed
In an official statement shared on X (Twitter), Stream Finance said an external fund manager overseeing part of its portfolio reported a loss of approximately $93 million.
According to the announcement:
“We are actively withdrawing all liquid assets and expect this process to be completed in the near term. All deposits and withdrawals are temporarily suspended until the scope and causes of the loss are fully assessed.”
The project’s team emphasized that Perkins Coie LLP attorneys Keith Miller and Joseph Cutler have been engaged to conduct a full investigation.
Stream said it will issue periodic updates as new information becomes available, reaffirming its “commitment to transparency and strong corporate governance.”
Withdrawals Suspended, Assets Secured
Stream Finance confirmed that all deposits and withdrawals are temporarily frozen while the team works with legal advisors to identify the source and extent of the loss.
Pending deposits will also not be processed until further notice.
This pause is intended to prevent any additional loss or liquidity drain during the audit period.
The protocol is now actively recalling and securing liquid assets from connected platforms. Internal risk teams are working alongside external auditors to evaluate exposure across all smart contracts and custodial accounts.
For investors, the pause means funds are locked for the moment, though the project maintains that asset safety remains a priority.
Legal Oversight by Perkins Coie
The choice of Perkins Coie LLP, a leading U.S. law firm known for blockchain and fintech regulation, adds weight to Stream’s response.
Keith Miller and Joseph Cutler, the two attorneys named in the announcement, both have extensive experience handling crypto compliance, litigation, and fraud investigations.
Their involvement signals that Stream is treating the loss as a serious governance event, not a routine protocol glitch.
The move also aims to reassure institutional backers and retail investors that Stream intends to handle the situation transparently and recover as much of the lost capital as possible.
The XUSD Depeg
Before the loss was confirmed, Stream’s staked stablecoin XUSD began losing its peg on Monday.
According to market data, the depeg triggered panic among holders, as liquidity pools drained and swap spreads widened across DeFi platforms.
XUSD, like many algorithmic or partially collateralized stablecoins, depends heavily on external fund management and collateral backing.
When trust in that system breaks, the peg often fails quickly.
The incident reignited a broader conversation about stablecoin risk in decentralized finance.
DeFi Analysts Weigh In
Crypto researcher Tom Wan (@tomwanhh) shared a thread on X, outlining key lessons from the Stream Finance situation and the XUSD depeg.
He summarized four critical takeaways:
- Asset Issuers: must maintain Proof of Reserves and TVL breakdowns. Transparency isn’t optional anymore, it’s a core user expectation.
- Risk Curators & Lending Platforms: need deeper analytics around risk exposure, not just flashy APY figures. “Right now, users decide mainly based on APY, which is dangerous,” he noted.
- DeFi Projects: Composability is powerful, but when protocols build on unstable products, contagion risk spreads faster.
- Risk Oracles: should combine both NAV-based and market-based data to detect imbalance early.
His comments resonated widely, as several analysts agreed that the Stream case highlights a systemic DeFi weakness, overreliance on external fund managers and opaque yield strategies.
The immediate reaction in DeFi markets has been cautious.
Liquidity for XUSD trading pairs on major DEXs fell sharply, while borrowing rates on DeFi lending platforms connected to Stream rose as users pulled collateral.
Despite the turmoil, other top stablecoins like USDT ($1.00) and USDC ($0.999) remain steady, underscoring the divide between fully reserved stablecoins and algorithmic models.
A Broader Warning for DeFi
The Stream Finance situation echoes previous collapses in the DeFi space, where lack of transparency and off-chain exposure led to rapid contagion.
Projects like TerraUSD (UST) and Iron Finance showed how quickly trust can evaporate when collateral or management structure isn’t fully verifiable.
While Stream hasn’t declared insolvency, the $93 million loss and stablecoin depeg highlight a deeper issue, DeFi’s dependence on third-party fund managers without real-time on-chain proof.
Experts say the event could push regulators and developers alike to rethink risk transparency frameworks, especially for yield-bearing stable assets.
Stream’s Road Ahead
For now, Stream Finance’s next moves will depend on the findings of Perkins Coie’s investigation.
Key priorities include:
- Tracing the missing $93M and identifying whether it was due to mismanagement, market loss, or fraud.
- Restoring XUSD’s peg, possibly through recapitalization or partial redemption mechanisms.
- Rebuilding user trust via improved on-chain disclosure and third-party verification.
Stream’s decision to go public quickly and hire external investigators may help mitigate reputational damage, but recovery will likely be slow.
The Stream case is a sharp reminder that transparency in DeFi isn’t a luxury, it’s survival.
As Tom Wan noted, “Composability is great, but if you build on shaky products, contagion spreads fast.”
For a sector built on the promise of open ledgers, trust still depends on verifiable proof, not assumptions.
And with $93 million gone, Stream Finance’s response will now serve as a test for how a DeFi project handles crisis under public scrutiny.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
Follow us on Twitter @themerklehash to stay updated with the latest Crypto, NFT, AI, Cybersecurity, and Metaverse news!