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May 1st: Pharos Watch exposes pmUSD Three days later: pmUSD depegged. Currently trading at $0.422, down 56.8% in 24 hours. The lighthouse sees everything before it happens.

The rsETH hack is leading to withdrawals across all lending protocols, even on solana and unaffected protocols: - Aave: -6,200m (-23%) net inflows - Morpho: -716m (-9%) - Sky: -272m (-4%) - JupLend: -76m (-8%)

So there are $99.4M dollars backing 104.7M shares yet somehow each share is supposed to be worth $1.05 interesting 🤔🤔🤔

Adam Cochrans 'certified defi gems' list is currently down 98.7% on average

Well boys, think I figured out (part of) the scam, and it is a doozy. Strap in. TLDR: Stream (xUSD) and Elixir (deUSD), and likely more, are recursively minting each other tokens in order to inflate there own TVL and create a ponzu the likes of which we haven't seen for awhile in crypto. NOTE: In the name of readability and due to X restrictions all txn hashes and addresses will be posted in a follow up tweet for those that wish to follow along themselves. We start our journey on mainnet, watching the flow of USDC funds that have just landed in the Stream xUSD wallet last night. 0x15 - First step is to transfer the USDC out to another Stream controlled address 0x33, in this case to the tune of $4.4m. - 0x33 places a cow swap order to buy USDT, which is paid out to 0x25. - 0x25 takes that USDT and uses it to mint the equivalent amount of deUSD from their on chain minter 0x69 - 0x25 then transfers the deUSD back to 0x33 which in turn transfers it back to the main Stream wallet 0x15. - Stream then takes that deUSD and bridges to AVAX, World chain or any other L2 that has lending markets listing sdeUSD, uses it as collateral to borrow other stables such as USDT or AUSD, swaps to USDC and bridge back to mainnet. This is repeated one or two more times with varying amounts and lending markets, but the end state is Stream mints deUSD, uses that as collateral to borrow stables and mints more. Yesterday they did 3 rounds to mint about 10m deUSD. While degenerate yes, not inherently scammy. Enter Part 2 Usually when leverage looping, the last txn is just to supply the last amount as collateral. But Stream has a special power, which is their wallet receive's all USDC used to mint their "stable" coin xUSD and boy do they use it. So with the final USDC they borrowed they recursively mint their own xUSD coin. Yesterday using the same $1.9m USDC they minted about 14.5m xUSD as shown in the tweet below. This means xUSD is not only not actually backed 1:1 but the protocol itself is the largest holder of the token. It currently controls over 60% of the xUSD in circulation, meaning if we assume all is recursively minted like this then each xUSD is backed by at most $0.40. But for what purpose? Well this is where it gets fun. The main thing to do with xUSD other than hold, is leverage loop it where listed on Euler, Morpho etc. But who would lend millions of stables against a token the protocol just minted out of thin air you ask? 🤔 Well none other than our friends at Elixir who happen to find themselves with an extra $10m newly acquired USDT. 🤯 - Step one is to transfer the $10m USDT to what their "Transparency Dashboard" labels "Elixir's sUSDS Multisig" (lol) 0x73 - Next 0x73 creates a Cow swap order to swap the USDT back to USDC and have it land in 0x1b - 0x1b bridges the $10m USDC to Plume network and then transfers it to a Safe at 0xaF8 - The Elixir Safe then supplies the USDC directly to a Morpho market that lends against, you guessed it xUSD. -This market is hidden from all available morpho UI's and Elixir is the only depositor. There is currently over $70m USDC supplied and >$65m borrowed. - Shortly after each deposit Stream will then come along with its brand new xUSD it minted to itself, borrow the USDC, bridge back to mainnet and we find ourselves back at the start of the story. Funny enough as I was writing this they seem to be kicking off another round starting with another minting of deUSD. While I did not dive fully in yet I would assume most markets that Stream uses to borrow against deUSD are also funded in similar manners, potentially by other partner "stable coins" engaging in the same tactics. It is hard to know for sure how much actual collateral is backing this full system but seems likely to be sub $0.10 per $1. Though what's a bit of leverage when you can each advertise 10-15% TVL growth overnight, just look at this beautiful chart from the Elixir dashboard showing their TVL growing about $60m in just a few weeks. (that amount sounds familiar) The exposure runs rampant through DeFi, not only just holding xUSD or deUSD but depositing into any market or curated vault that lends against them or the other Yield coins that also are at least in part backed by these. Make sure you know where your yield is coming from. Happy Farming.

Literally billions of dollars categorized as "basis trading" on Defi Llama And none of them had losses....!!!!! Where's the poop?

Is Yield Fi's yUSD yield stablecoin unbacked? Are liquid vaults participating in illiquid lending deals? Is the whole house of cards pushing TVL to new protocols with unknown risks? We leave it for you, dear reader, to decide in this edition of Spicy Sunday. YieldFi's YUSD markets as a yield bearing stablecoin vault taking neutral positions in DeFi to earn yield. Their transparency page shows $109 million in assets the main wallet 0x37829fe9b8e67b8267c2058b9459f524b9e3ca5d Etherscan lists $157,790,676 of circulating market cap likely considering either some bridged yUSD has moved to other chains. This discrepancy between backing assets and reported TVL remains unexplained, so we dig further. The largest positions are deposits in a Morpho vault named ABRC. The vault is hidden from the UI. We find the nomenclature and secrecy odd until we realize the only supply position is to a YUSD / USDC market. The main borrowers in this market are another set of wallets from the transparency page marked in the vyUSD section. These are used exclusively to leverage up YUSD on morpho and euler markets. The second largest position is a looped mHYPER position currently earning a negative yield. Between their various positions, YieldFi makes up for over 10% of mHYPER TVL. Hyperithm's mHYPER markets as a yield bearing stablecoin vault taking neutral positions in DeFi to earn yield. mHYPER has a transparency page of its own, listing the main wallet as 0x68e7e72938db36a5cbbca7b52c71dbbaadfb8264 The positions include deposits in vaults lending to mHYPER itself as well as other yield bearing tokens. On Arbitrum, mHYPER is lending against YUSD, with a second allocation to xUSD, provenance of Stream Finance. Stream Finance's xUSD markets as a yield bearing stablecoin vault taking neutral positions in DeFi to earn yield. Stream has a transparency page, linking to a Debank cluster listing the main wallet as 0x1597e4b7cf6d2877a1d690b6088668afdb045763 The largest position is $59 million against $50 million borrowed, looping–at a loss again–none other than mHYPER. With this and other positions Stream Finance makes up for over 20% of mHYPER TVL. What are we to make of this? A daisy chain of circular lending is propping up yield vault market. One vault takes deposits and lends against, deposits to or loops another vault. Stables are washed through multiple vaults, boosting TVL for the vaults themselves and related protocols. An i-scratch-your-back-you-scratch-mine system of yield sharing. The system looks fragile when we consider the liquidity situation. Any sizable outflow of deposits from any part of the system will manifest problems throughout the chain. With much of the TVL looping, outflows also pressure further reduction as positions become unprofitable. If YUSD cannot redeem deposits in full, mHYPER users will take a loss on their lending, further impairing the solvency of the whole system. And the value deposited and lent is based on a system of trust, not verification. YUSD price has flatlined since the drama of 10/10 when there was also $50 million of outflows. Redemption price is set by the team. mHYPER and other yield vaults also have opaque pricing systems that rely on off-chain reporting. The teams determine the price of vaults in each system and this price is baked in to the immutable oracles used to borrow many 8 figures if not more of stables. With the market liquidity, redemptions and even the asset pricing all in the hands of the curators, there is little incentive to be transparent on vault share price or to repay debts. While outflows are slow, holes can be papered over with inflows and further washing between vaults. But any loss in the system not revealed is left on the last depositors. Further outflows only reduces the backing. The first to panic exit at the expense of the last.