Moonwell proposes bad-debt plan; USDC withdrawals blocked

Moonwell submitted governance package MIP‑X66 on Sept. 4, combining changes to market risk settings, interest‑rate models and a plan to convert protocol‑owned reserves on Base and OP Mainnet into USDC for recapitalization. User USDC withdrawals remain unavailable following a late‑August market incident on Base.

Anthias Labs projected that the proposed rate adjustments across seven Base markets would lower monthly interest accruing on outstanding bad debt from about $338,785 to $50,273, a reduction of roughly $288,512 or 85%, assuming current balances and utilization do not change. Those figures measure slower accrual on impaired loans and do not indicate cash recovered, principal forgiven or funds returned to suppliers.

The reserve component of MIP‑X66 targets protocol‑owned assets only and excludes transfers of user funds. Moonwell’s Sept. 4 update did not confirm any actual reserve transfers and provided no timetable for repaying suppliers. Public records do not verify the proposal’s execution status or any USDC conversions.

The package follows the Aug. 27 MAMO market incident on Base. Anthias’s Aug. 28 post‑mortem attributed the incident to inflated collateral accounting combined with oracle‑price manipulation and estimated about $9.1 million in residual borrower obligations at its Aug. 27 evidence cutoff, including roughly 2.35 million USDC in remaining borrower debt. Those outstanding borrower obligations are not a direct measure of current withdrawal liquidity held by suppliers.

Some suppliers report difficulty accessing funds. A forum user identifying as Dr_Bahmani wrote they deposited a five‑figure USDC position via MAMO on Sept. 2 and later found withdrawals effectively unavailable, requesting separate figures for market cash, performing and impaired debt, reserves and recoveries and a policy on post‑incident deposits and fair withdrawals. The post did not assert that a compensation program exists or that any final haircut has been set.

Moonwell engaged security firm Zero Shadow to assist with recovery options. The Sept. 4 update provided no recovered‑cash amount and did not guarantee full repayment to suppliers. The proposal notes that executing MIP‑X66 would not by itself reopen borrowing on Base; any re‑enablement would require additional risk assessment.

Governance delegate PGov referenced the same $288,512 monthly reduction when supporting MIP‑X66. Stakeholders are awaiting vote results, any confirmed reserve transfers, findings from recovery work and further risk assessments before borrowing on Base can be considered for re‑enablement.