DeFi

Security

AlphaFi

<h2 id="b-tldr-b">TLDR:</h2>
<ul>
 <li style="font-weight: 400">AlphaFi is winding down AlphaLend after an ALPHA oracle issue created undercollateralized debt.</li>
 <li style="font-weight: 400">Sui Foundation covered the full shortfall, keeping AlphaFi solvent and protecting user funds.</li>
 <li style="font-weight: 400">Withdrawals remain open, while new AlphaLend deposits and loans are now paused.</li>
 <li style="font-weight: 400">Sui security tooling helped detect the issue and will become available to DeFi protocols later.</li>
</ul>
AlphaFi is shutting down AlphaLend after an ALPHA oracle issue created bad debt from undercollateralized loans.
The <a href="https://blockonomi.com/sui-foundation-unveils-infrastructure-framework-for-autonomous-ai-agent-execution/" rel="noopener noreferrer nofollow">Sui Foundation</a> has fully covered the shortfall, keeping AlphaFi solvent and protecting user funds. Withdrawals remain open, while new deposits and loans have been paused.
AlphaFi said certain borrow positions using ALPHA as collateral became substantially undercollateralized. The issue created bad debt that required intervention from the Sui ecosystem.
<h2 id="b-why-is-alphafi-shutting-down-alphalend-b">Why Is AlphaFi Shutting Down AlphaLend?</h2>
The Sui Security Team identified a misconfiguration involving AlphaFi’s ALPHA oracle. An oracle supplies price data that <a href="https://coincentral.com/kamino-appoints-michael-weisz-as-ceo-to-lead-solana-defi-lending-expansion/" rel="noopener noreferrer nofollow">lending protocols</a> use to assess collateral values.
In this case, the issue allowed some ALPHA-backed borrow positions to become substantially undercollateralized. That meant the collateral was no longer sufficient to cover the outstanding loans.
AlphaFi said the resulting bad debt has now been fully covered. The Sui Foundation provided assistance to ensure the protocol remained wholly solvent.
<div class="embed-x">
 <blockquote class="twitter-tweet">
 AlphaFi is winding down in an orderly way. The protocol is in maintenance mode: withdrawals remain open, but users cannot take new loans.
 — AlphaFi (strategic arc) (@AlphaFiSUI) <a href="https://x.com/AlphaFiSUI/status/2103622950935281787?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">September 25, 2026</a>
 </blockquote>
</div>
The foundation’s intervention means AlphaFi users will not absorb the shortfall. AlphaFi also said principal and generated yields remain protected.
The protocol has entered maintenance mode during the wind-down. Users cannot supply new assets or take new loans from AlphaLend.
Existing borrowers have been asked to unwind their positions and withdraw their assets. Withdrawals remain available while AlphaFi completes the shutdown process.
<h2 id="b-alphafi-shutdown-includes-slush-strategy-withdrawals-b">AlphaFi Shutdown Includes Slush Strategy Withdrawals</h2>
The AlphaFi shutdown also affects users accessing strategies through Slush. AlphaFi said users can now withdraw funds directly through Slush Wallet.
The WAL vault lock period has been removed, allowing users to withdraw without waiting. Withdrawals from SUI, WAL, DEEP, and <a href="https://moneycheck.com/coinbase-introduces-bitcoin-backed-fixed-rate-usdc-borrowing-via-morpho-midnight/" rel="noopener noreferrer nofollow">USDC</a> strategies now arrive instantly.
Users with pending withdrawal requests should cancel those requests and submit new withdrawals. AlphaFi said this process allows funds to arrive in wallets immediately.
The ALPHA vault has also been discontinued. Its lock period has been removed, allowing users to withdraw ALPHA at any time.
AlphaFi said it will support the Sui Foundation’s investigation and remediation efforts. That includes providing records, technical assistance, and support for recovering amounts owed.
<div class="embed-x">
 <blockquote class="twitter-tweet">
 Following the Sui Security Team’s identification of and assistance with the resolution of <a href="https://x.com/AlphaFiSUI?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">@AlphaFiSUI</a> 's misconfiguration of their ALPHA oracle and subsequent creation of bad debt, AlphaFi is winding down operation of their protocol.
 Sui Foundation has made the decision to… <a href="https://t.co/7m62iqYhnC" rel="noopener noreferrer nofollow">https://t.co/7m62iqYhnC</a>
 — Sui (@SuiNetwork) <a href="https://x.com/SuiNetwork/status/2103624551553028331?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">September 25, 2026</a>
 </blockquote>
</div>
The Sui team also said its security tooling helped identify the oracle misconfiguration. After its formal launch later this fall, the tooling will become available publicly to Sui <a href="https://blockonomi.com/only-10-of-rwa-liquidity-is-active-in-defi-protocols/" rel="noopener noreferrer nofollow">DeFi protocols</a>.
AlphaFi plans to continue the wind-down until the final user withdraws. After that process ends, AlphaFi will no longer operate within the Sui ecosystem.
The key mechanism behind the shutdown was an ALPHA oracle misconfiguration that weakened collateral coverage. Sui Foundation funding absorbed the resulting bad debt, while withdrawals allow users to recover their assets.
The post <a href="https://blockonomi.com/alphafi-shutdown-sui-foundation-covers-bad-debt-as-alphalend-winds-down/" rel="noopener noreferrer nofollow">AlphaFi Shutdown: Sui Foundation Covers Bad Debt as AlphaLend Winds Down</a> appeared first on <a href="https://blockonomi.com" rel="noopener noreferrer nofollow">Blockonomi</a>.

AlphaFi Shutdown: Sui Foundation Covers Bad Debt as AlphaLend Winds Down

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