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Re7 Labs update regarding previous and ongoing efforts to address and mitigate issues in the xUSD Euler Markets, deUSD and sdeUSD markets on Plume, and sUSDX and USDX markets on BSC. We’d like to provide an update regarding the above markets. Please be assured, Re7 Labs have been and are still actively taking all possible steps to mitigate risk and, where feasible, to prevent or minimise potential losses. With full transparency in mind, below is a recap of events. Stream - xUSD xUSD went live in Labs Earn vault on Plasma on October 5th, and over the following week the vault’s deposits increased significantly, those funds almost immediately being borrowed. Towards the end of that week, after the large-scale market correction on 10th October, Re7 Labs conducted some due diligence activities on borrowers across our vaults. From our analysis, we identified that Stream had been borrowing USDT0 from the xUSD vault while using its own xUSD token as collateral, which prompted us to contact Stream to confirm their ability to repay. We were assured by the Stream CEO that their position was stable and unaffected by market events. A couple of weeks passed with no further incident until Stream’s open positions started to incur inflated borrowing rates across several markets. As a result, on October 29th Re7 Labs again engaged with Stream to investigate. Following these discussions, Stream partially repaid their borrow position on Plasma, and the following day also repaid $7 million USDC on Re7 Labs vault on Worldchain, which enabled some users to withdraw positions that were lent against sdeUSD collateral. In parallel to these conversations and in order to prevent any further exposure, Re7 Labs immediately reallocated all funds (USDT0) away from the xUSD market in the Earn vault to prevent depositors from being further exposed to xUSD via this vault. Additionally we set caps to 0 and removed the xUSD market from the supply queue in our Euler Earn Vault to disable any new deposits to the Stream market from our Vault. Elixir - deUSD and sdeUSD On October 21st, Elixir reached out to Re7 Labs and mentioned there was demand for borrowing in Re7 Labs Euler Earn USDT0 vault on Plasma, and requested an allocation to the Elixir Frontier market of $6-7m. Re7 Labs extended the allocation and those funds were borrowed. Throughout that week all of Re7 Labs’s sdeUSD and deUSD markets across all of our vaults on every chain reached 100% utilization. Re7 Labs was uncomfortable with this level of borrowing on our vaults and had asked Elixir to start to pay back some of the outstanding debt. On October 27th Re7 Labs discovered that the borrower that was using deUSD and sdeUSD as collateral appeared to be linked to Stream. Upon discovering this connection between Stream and Elixir, Re7 Labs began reducing exposure to both Stream and Elixir by reducing caps and allocating funds away from markets containing xUSD, deUSD, and sdeUSD. On November 6th, the borrow position using sdeUSD collateral was fully repaid on Plume, resulting in no remaining deUSD or sdeUSD exposure in Re7-curated markets. Exposure: WorldChain Morpho Markets: sdeUSD/USDC: $214,040 Euler AVAX Markets: sdeUSD/AUSD: $5,660,000 deUSD/AUSD: $2,250,000 sdeUSD/USDC: 2,150,000 Euler Earn Plasma Markets: Frontier Elixir USDT0 $3,700,000 Total impact from Elixir: $13,974,040 Stable Labs - USDx and SUSDx November 4: Suspicious activity identified Our internal risk monitoring identified that accounts linked to the largest holders of sUSDX and USDX positions across Lista and Euler were sending funds to Binance exchange accounts. Borrow rates had also spiked to 100%, so we reached out to Stable Labs asking them to justify how they could afford to borrow at those rates and why they weren’t unwinding those positions. November 5, Morning: No meaningful response Stable Labs' CEO said they would "get in touch with the LP." We then cross-referenced with various BSC projects and it looked like all the wallets that had outstanding borrowing appeared to be belonging or linked to the Stable Labs CEO. With no further action, we set a strict deadline to repay all outstanding positions by November 5th. November 5, Midday: Protective measures We reduced the supply cap on Euler to approximately $5 million. We asked if Stable Labs would whitelist addresses to instantly unstake sUSDX for USDX. They said this wasn't possible which we interpreted as a red flag. November 5, 11:00 PM: Deadline passed with no action We adjusted risk parameters for BSC markets to enable liquidation of the largest sUSDX LP positions: sUSDX/USD1: 82% LLTV, 77% LTV USDX/USD1: 82% LLTV, 77% LTV sUSDX/USDT: 70% LLTV, 65% LTV USDX/USDT: 70% LLTV, 65% LTV The liquidation bot stopped part way through liquidations due to insufficient DEX liquidity for sUSDX. We reverted LTV ratios to their original levels and set supply caps to 0. November 6, Morning: conversation with Flex, Stable Labs CEO We spoke with Flex during which we noticed contradicting statements and errors, suggesting that Stable Labs may be in trouble. November 6, Midday: Coordinated response Following a message posted by Re7 Labs on their Discord, Lista passed a DAO proposal to push the malicious position into liquidation, preventing approximately $3-4M in bad debt on the USD1 market. On Euler, we implemented the following measures: Supply caps: Set to zero LLTVs: Reduced Borrowing: Disabled on affected vaults Fees: Reduced to zero USDX and sUSDX: No further borrowing permitted November 6, Afternoon: Immediate demand issued We requested Stable Labs to deposit liquidity into these markets to enable users to unwind their positions: Lista Market: USDX/USDT: $1,800,000 Euler Markets: sUSDX/USDT: ~$5,490,000 sUSDX/USD1: ~$6,490,000 sUSDX/YUSD: ~$316,000 sUSDX/USDX: ~$818,000 Total impact from Stable Labs: ~$13,114,000 We still haven’t received a response. Next Steps Throughout this process, Re7 Labs has maintained — and continues to maintain — active communication with contributors, external partners, and legal counsel to assist in addressing and resolving the situation. We are seeking detailed legal advice to ensure that all aspects of the matter are fully assessed and to develop an appropriate legal and strategic response. While Re7 Labs’ involvement as a curator has its limitations, we continue to actively look for ways to resolve these issues, working with partners and the community to find solutions. Re7 Labs remains firmly committed to transparency, diligence, and operational integrity, and will continue to collaborate closely with relevant stakeholders and aim to provide more frequent updates as new information becomes available.