AlphaFi Shuts Down Amid Bad Debt Crisis in Sui Ecosystem

AlphaFi, a prominent DeFi platform in the Sui ecosystem, has announced it is winding down operations entirely due to a bad debt crisis. The protocol entered maintenance mode, halting all new deposits and loans while keeping withdrawals fully open for users to exit their positions safely.

The root cause of the issue traces back to certain borrow positions taken against ALPHA token collateral on AlphaLend, the protocol's lending arm. These positions became substantially under-collateralized over time, leaving the protocol carrying bad debt it couldn't fully cover on its own.

However, thanks to coordinated action with the Sui Foundation, the bad debt has been fully covered, and user funds remain safe throughout the process. AlphaFi has committed to seeing this wind-down through completely, continuing to post updates until the very last user has successfully withdrawn their funds.