Key Takeaways:

• Stream Finance revealed that an external fund manager overseeing part of its portfolio reported a loss of about $93 million in fund assets.
• The firm has retained Keith Miller and Joseph Cutler of Perkins Coie LLP to conduct a comprehensive investigation into the incident.
• The Stream has temporarily paused all deposits and withdrawals, including pending transactions, while it assesses the scope and cause of the loss.

Stream Finance has hired the law firm Perkins Coie LLP to investigate the loss of approximately $93 million in fund assets managed by an external fund manager, the decentralized finance (DeFi) protocol announced on Tuesday.

Stream faces $93M fund loss

In a statement posted on X, Stream said the incident was disclosed by the external manager overseeing part of its portfolio.

The company is “actively withdrawing all liquid assets” and expects the process to be completed soon. In the meantime, all deposits and withdrawals, including pending transactions, have been suspended as the team assesses the scope and cause of the loss.

The investigation will be led by Keith Miller and Joseph Cutler of Perkins Coie, a law firm well known in the digital assets space.

Stream said the move reflects its “unwavering commitment to transparency and robust corporate governance.”

XUSD stablecoin plunges as traders rush to exit

The disclosure triggered an immediate reaction across the Stream ecosystem. Its stablecoin, XUSD, which is designed to hold a $1 peg, plunged as traders rushed to exit positions. 

Within hours of the announcement, XUSD dropped to $0.92 on decentralized exchanges such as Uniswap, before sliding as low as $0.43 overnight amid thin liquidity and panic selling.

Analysts attributed the drop to a crisis of confidence rather than a confirmed technical exploit. On-chain data didn’t indicate any signs of a smart contract breach, and trading activity was concentrated on Arbitrum, the layer-2 blockchain where a significant portion of Stream’s liquidity resides.

The timing of the news, coinciding with reports of a separate exploit on Balancer, likely worsened market jitters across DeFi platforms.

Social media speculation added to the pressure, with some users flagging potential leverage mismatches between Stream’s reported backing and its outstanding loans.

Estimates circulating on X suggested that as much as $170 million in assets supported $530 million in exposure, implying a leverage of more than four times, although those figures could not be verified.

Stream’s model under scrutiny as investigation begins

Launched in early 2024, Stream positioned itself as a capital-efficient yield platform, blending decentralized and traditional financial strategies such as lending arbitrage and hedged market making.

The use of external managers, now at the center of the probe, was part of that hybrid model, designed to expand capacity during periods of high demand.

The company said it will issue periodic updates as the investigation progresses.

“Until we can fully assess the situation,” Stream said, “withdrawals and deposits will remain paused.”