DeFi lender Anthias proposes bad-debt fix as user USDC funds remain locked

Following the August 27, 2026 MAMO market incident on Base, DeFi lender Moonwell proposes governance plan MIP-X66 to address bad debt. The proposal aims to reduce monthly bad-debt interest accrual by 85%, from $338,785 to $50,273, and recapitalize the USDC market using protocol-owned reserves. However, user USDC funds remain locked, and borrowing on Base remains suspended pending further risk assessments.

MAMO market incident

• ▪Anthias Labs' August 28, 2026 post-mortem estimated approximately $9.1 million in residual borrower obligations, including 2.35 million USDC in remaining borrower debt, from the MAMO market incident.
• ▪The MAMO market incident occurred on the Base network on August 27, 2026, resulting from inflated collateral accounting combined with oracle-price manipulation.

Bad debt interest reduction

• ▪Moonwell's proposed interest-rate changes across seven Base markets are projected to reduce monthly interest accruing on outstanding bad debt from approximately $338,785 to $50,273.
• ▪The projected 85% reduction in Moonwell's bad-debt interest accrual would save an estimated $288,512 monthly, though $50,273 in monthly interest would continue to accrue.

MIP-X66 governance proposal

• ▪Governance delegate PGov supported Moonwell's MIP-X66 proposal, citing the projected $288,512 monthly reduction in bad-debt interest accrual.
• ▪Moonwell's governance proposal MIP-X66 entered its vote collection period around September 4, 2026, combining market risk settings, interest-rate models, and protocol reserve usage.

Protocol reserve recapitalization

• ▪The proposed Moonwell reserve withdrawals for USDC recapitalization apply exclusively to protocol-owned assets and exclude the transfer of user funds.
• ▪Moonwell's recovery plan proposes withdrawing available protocol-owned reserves on Base and OP Mainnet to convert them to USDC for market recapitalization.

Supplier withdrawal restrictions

• ▪Moonwell USDC depositors face locked withdrawal liquidity, with security firm Zero Shadow retained to assist in recovery efforts without guarantees of full repayment.
• ▪Moonwell forum user Dr_Bahmani alleged depositing a five-figure USDC position on September 2, 2026, without warning, subsequently facing unavailable withdrawal liquidity.

Base borrowing reopening conditions

• ▪Reopening borrowing on the Base network remains subject to further risk assessment and will not automatically restart upon the execution of Moonwell's MIP-X66.
• ▪Moonwell stated that while the MIP-X66 proposal could help establish conditions to consider reopening Base borrowing, execution alone does not constitute a restart.

Debatable claims

• ▪Moonwell should have suspended USDC deposits immediately after the MAMO exploit
• ▪Moonwell should guarantee full repayment to depositors affected by the MAMO exploit

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