Decentralized Finance (DeFi) platform Stream Finance has plunged the sector into fresh uncertainty after announcing a colossal $93 million loss in its fund assets, a setback attributed to a third-party external fund manager. In the wake of the disclosure, the platform has taken the immediate and drastic step of suspending all deposits and withdrawals.

The shock announcement, made via the platform’s official social media channels late yesterday, cited the external fund manager as the source of the approximately $93 million shortfall in Stream funds under their supervision.

Legal Investigation and Asset Withdrawal Underway

In a bid for transparency and accountability, Stream Finance has promptly engaged prominent legal counsel from the law firm Perkins Coie LLP, appointing attorneys Keith Miller and Joseph Cutler to spearhead a comprehensive investigation into the incident.

The platform's primary goal is now the urgent safeguarding of remaining user funds. The team stated:

"We are actively withdrawing all liquid assets and expect this process to be completed in the near term. Until we are able to fully assess the scope and causes of the loss, all withdrawals and deposits will be temporarily suspended, and pending deposits will not be processed."

Stablecoin Plunge and Market Contagion Fears

The news had a swift and devastating effect on Stream Finance's associated collateralized stablecoin, Staked Stream USD (XUSD). Following the announcement, the token rapidly depegged from its dollar value, plummeting by as much as 58% to trade as low as $0.30, according to CoinGecko data.

This sharp devaluation of XUSD has amplified concerns over potential contagion risks across the interconnected DeFi lending markets. Analysts have noted that the issue may extend beyond the direct $93 million loss, with one independent analyst identifying a potential exposure network of over $285 million in related loans and collateral positions.

The incident serves as a stark reminder of the inherent risks associated with complex, yield-generating DeFi protocols that rely on external counterparties for fund management. The broader crypto community is now closely monitoring the investigation, which is expected to provide periodic updates as the full extent of the loss and the path to potential recovery become clearer.