Anchor Protocol-Linked Stablegains Allegedly Loses $42M to UST Collapse

Stablegains, a U.S.-based startup aimed at generating yield for investors via decentralized finance (DeFi) lending, has reportedly lost $42 million worth of funds belonging to investors as a result of the recent TerraUSD (UST) meltdown.

Stablegains – backed by the famous startup accelerator Y Combinator – allegedly made use of the now defunct Terra-based DeFi protocol, Anchor Protocol, to generate yield for investors. Stablegains promised investors a 15% gain on stablecoin deposits, while investing a majority of the funds on Anchor to generate the high-risk 19% yield on offer.

Anchor and UST’s implosion allegedly meant the platform lost customer funds and could no longer generate the promised returns. Stablegains allegedly lost about $42 million belonging to 4,878 customers. 

Stablegains Scrambles in the Aftermath of UST Collapse

Stablegains enabled users to deposit their funds in stablecoins or USD via bank wires. However, the company may not have clearly disclosed that the funds were being converted into UST to be deposited on Anchor.

Instead, a now-updated terms of service page claimed that the platform primarily uses the USDC stablecoin, and may also use UST and DAI. The former term also noted that the company allocates funds “across a number of stablecoins” to mitigate risks associated with the “instability of a single coin.”

However, the Terra collapse proves that the above claims were allegedly false. In the wake of the collapse, Stablegains has mandated users to withdraw existing stablecoin assets at the current UST price of 0.08 instead of the 1:1 peg. The company’s website clarified that if a user withdraws $1000 worth of UST, which is currently trading at $0.08, they would receive $80 worth of USDC, representing a 92% loss.

At the same time, Stablegains users are not eligible for any potential airdrops if Terra decides to relaunch the network through a fork. Stablegains urged investors to withdraw their now-depleted funds for a non-custodial wallet to qualify for the airdrop.

Upon reaching out to Stablegains, co-founder Emil Dalgård Rasmussen confirmed that the company was indeed helping customers deposit funds with Anchor in UST, meaning that all parties were massively hit. 

“It’s dark times but we are doing what we can to support as best possible now,” Emil added before clarifying alleged changes to the company’s terms of service.

“It’s important to clarify that we have always been transparent about generating yields via Anchor protocol and UST. Check out our Learning Center and our Terms of Use. Also, it’s important to note that we have not changed our terms of use since December 2021. Thankfully most of our customers know this.”