Market Analysis

EVODeFi Bridge May Be Missing $66M in Funds

Starting yesterday, users on Twitter suggested that EVODeFi could have a multi-million dollar discrepancy in its protocol.

Key Takeaways

  • EVODeFi, a bridge in the Oasis Protocol ecosystem, may be $66 million short of funds.
  • EVODeFi responded to the turmoil by pausing the bridge on June 7.
  • The Oasis Foundation has issued a statement attributing those losses to FUD rather than protocol failures.

Rumors of insolvency are circulating around EVODeFi, a bridge to several DeFi ecosystems that may be $66 million short of funds.

Possibly $66 Million in Unbacked Funds

On June 7, various users on Twitter suggested that EVODeFi could have a multi-million dollar discrepancy in its protocol.

Specifically, those reports suggest the project has 18 million USDT but needs 96.8 million USDT to remain solvent. Likewise, they suggest that it has 91.5 BTC but needs 293 BTC for solvency. At current prices, EVODeFi could be underfunded by approximately $84 million.

However, EVODeFi also supposedly has an excess of other assets in addition to the above shortages. The protocol has 27 million USDC but needs only 10.8 million USDC; it also has 4,229 ETH but needs only 3,421 ETH. Those excess funds are worth $18 million, an amount that would drop the overall shortage to $66 million.

The Rug Doctor, who leads the DeFi safety and education project RugDoc, gave support to the above estimate. “I’m assuming they have about $50 million of varying debt just from chatting with their team today,” she told Crypto Briefing.

The Rug Doctor believes that the project minted unbacked Tether (USDT) to buy back other assets, thereby supporting itself and ValleySwap during a period of financial desperation.

She shared with Crypto Briefing an on-chain transaction apparently showing a simultaneous USDT withdrawal to five different wallets within the same transaction. The unfeasible nature of that transaction—though unverified—suggests that the assets are unbacked.

EVODeFi Has Frozen and Restored Services

EVODeFi responded to the turmoil by pausing their bridge on June 7, claiming that “too many speculations” and volatile asset prices were hindering the bridge’s ability to withdraw user funds safely. EVODeFi has now resumed operation as of June 8.

The protocol has also stalled for time by requiring users to fill out a KYC form before processing users’ withdrawal requests.

The Rug Doctor gave a more general warning, stating that bridges are “generally the weakest point of any DeFi protocol” and should be “a last resort after a careful risk-benefit analysis.” She added that the EVODeFi crisis is “an unfortunate example of how an anonymous team can abuse their governance privileges to ultimately hurt users.”

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

Correction: This article originally implied affiliation between Oasis Protocol and EVODeFi. Oasis is not affiliated with EVODeFi and has not provided support in any way. Oasis previously warned users about EVODeFi and connected protocols in April.

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