DeFi lender left with $35 million bad debt after quoting depegged stablecoins at $1

Quick Take

  • DeFi lending protocol Scream kept the price of two unpegged stablecoins hardcoded to $1 on its platform.
  • Users borrowed other stablecoins on the cheap, leaving the DeFi lender with $35 million in bad debt.

Scream, a DeFi lending protocol on Fantom, has incurred $35 million in bad debt after failing to adjust the price of two stablecoins that lost their US dollar peg.

The two stablecoins in question are Fantom USD (fUSD) and Dei (DEI). Both coins still have a quoted price of $1, according to data from Scream’s dashboard. Yet they are trading well below peg. fUSD fell to as low as $0.69 while DEI fell to $0.52 at its lowest.

Whales took advantage of this situation to deposit large amounts of FUSD and DEI at a discounted rate and drained all other stablecoins from the Scream platform. Stablecoins like Fantom USDT, FRAX, DAI, MIM, and USDC have all been siphoned off from the platform.

As such, users with supposed deposits of these stablecoins are unable to process withdrawals from Scream.

The situation with fUSD was also further exacerbated by the fact that the stablecoin’s deposit limit was set to infinity instead of zero. Coupled with FUSD becoming depegged, this situation allowed users to borrow large sums of money against the bad debt and drain the protocol’s remaining stablecoins.

The DeFi lending protocol has also lost about 50% of the total value locked in its smart contracts, according to DeFiLlama.

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