Stables Labs announces phased USDX recovery plan following severe depeg

After a few days of silence, Stables Labs has announced a “USDX Restoration Arrangement” following the depeg of its synthetic stablecoin.

It stated that “due to market liquidity conditions and liquidation dynamics, the market price of USDX has experienced a deviation from its reference value. The stabilization mechanism of USDX is supported by collateralized positions and hedging strategies, which may exhibit adjustment latency under extreme market conditions.”

It proposed a phased recovery framework intended to restore USDX holders to a value “referenced to 1 USD,” though it explicitly stops short of making any guarantees.

A voluntary USDX recovery arrangement

The platform shared a registration form for affected holders, stating that “Impacted holder balances will be identified through an on-chain snapshot.”

Stable Labs said the restoration will come in phases, and its execution will depend on “resource allocation and recovery planning, liquidity conditions, and cooperative arrangements.”

However, the announcement didn’t meet a warm reception on X, as users questioned the lack of immediate repayment commitments, the absence of transparent reserve reporting, and the alleged closure of Stable Labs’ community Discord.

Others expressed concern that the pace of the recovery plan may lag behind ongoing liquidation risks across DeFi platforms still holding USDX or sUSDX exposure.

It all started with an exploit

The crisis reportedly began on November 3 after it was disclosed that Balancer, the decentralized liquidity protocol used across Ethereum and several EVM chains, v2 Composable Stable pools was exploited. Stable Labs was reportedly affected by this hack.

The USDX issuer initially assured users that USDX and its staked variant sUSDX were safe, stating that liquidity was being temporarily pulled “as a standard precaution” and would be restored after security verification.

However, the following day, the company acknowledged on X that the Balancer V2 Vault breach had allowed a hacker to steal $1 million worth of assets from the USDX/sUSDX V2 pool.

Stable Labs said it would fully cover the losses and that “no user funds have been affected.” It also took defensive measures, including restricting cross-chain bridge flows, blacklisting the attacker’s wallet, and coordinating with security teams to trace the stolen funds.

It also shared in the same post on X that “Liquidity on PancakeSwap (BNB Chain) has been restored and confirmed to be safe. All other integrated protocols on BNB Chain have also been verified as unaffected. Liquidity on Arbitrum and Base chains will be gradually restored once safety is confirmed.”

However, the breach introduced new stress into USDX’s liquidity structure at a time when market borrowing rates were climbing. The situation quickly worsened.

Loss of liquidity and a depeg

By November 6, USDX, which had previously had a circulating supply of over $683 million, fell below $0.60 across major decentralized exchanges.

Lista DAO, a lending platform integrated with USDX, stated that they are “aware and have been closely monitoring the MEVCapital USDT Vault and Re7Labs USD1 Vault, where collateral assets ($sUSDX and $USDX) continue facing abnormally high borrowing rates without repayment activity.”

Binance-backed PancakeSwap similarly warned users to monitor their positions in the affected vaults and remain aware of the situation.

Also, Lista DAO reportedly liquidated its USDX/USD1 vault to minimize potential loss. It executed a flash loan, liquidating 3.5 million USDX to recover about 2.9 million USD1.

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