$1.8M Liquidity Shortfall Leaves Moonwell Borrowers Stranded

DeFi lending protocol Moonwell has a $1.8 million liquidity problem in its cbETH market, which was caused by a February oracle error that priced cbETH at around $1.12 instead of its actual value of roughly $2,200.

The error led to 1,096.317 cbETH being seized and left Moonwell with about $1.8 million in bad debt. A later recovery proposal calculated approximately $2.7 million in net losses across around 181 borrowers liquidated between February 14th and 18th.

Moonwell's latest reserve round plan allocates $0 to fix the cbETH shortfall, even though there is a net shortfall of $1.768,664.86. The plan would allocate reserves pro rata among eligible borrowers, but it does not explain why no funds were allocated for the cbETH market.

Two participants reported issues with withdrawals due to low liquidity, and Moonwell's help material says that withdrawals depend on available liquidity. Moonwell and risk service provider Anthias Labs have not responded to public complaints about the issue.