Moonwell's $1.8M Liquidity Hole Sparks Concern Over cbETH Repayments

Decentralized lending protocol Moonwell is facing a liquidity crisis after proposing no repayment plan for its bad debt in cbETH, a Coinbase-issued token. The proposal was made by risk service provider Anthias Labs on August 24, despite the $1.77 million net shortfall in the Base market.

The shortfall stems from a February oracle error that priced cbETH at nearly $1.12 instead of its actual value of around $2,200. This mispricing led to liquidators seizing 1,096.317 cbETH and leaving Moonwell with approximately $1.8 million in bad debt.

Moonwell's latest reserve plan allocates reserves pro rata among eligible borrowers, but does not specify how the $0 allocation for cbETH was determined. The plan also excludes actions at or below $1,000 and caps repayments at the lowest of reserves, available cash, or current borrower debt.

Two suppliers have reported issues with withdrawing their funds, citing a liquidity deficit and low availability of cbETH. Moonwell's help material notes that withdrawals depend on available liquidity, highlighting the unresolved issue.