Resolv Labs has temporarily suspended all protocol functions following an exploit on Sunday in which an attacker minted 80 million unbacked tokens. The incident caused the project’s USR dollar stablecoin to lose its peg sharply, briefly falling to $0.14. The Resolv Foundation team announced the halt on Monday evening via X, stating that operations were frozen to contain the damage from the attack.
The suspension covers the main application, staking and unstaking of RESOLV tokens, and Season 4 airdrop claims. Resolv previously stated that its collateral pool remained intact and that no underlying assets had been lost. However, onchain analysis indicates the attacker converted most of the minted USR into Ether and sold approximately $25 million worth. USR is currently trading near $0.24, well below its intended one-dollar peg.
In an onchain message issued Monday, Resolv presented the exploiter with a white hat-style ultimatum. The attacker was given 72 hours to return 90% of the converted funds — roughly $25 million in ETH — along with all remaining USR, while being permitted to keep 10% as a bounty. The message warned that failure to comply would trigger escalation measures, including asset freezes coordinated with exchanges and bridges, public tracing, and law enforcement action. No movements have been recorded on the main wallet since the ultimatum was issued.
Michael Pearl, vice president of GTM and strategy at Web3 security firm Cyvers, told Cointelegraph that redemptions had been reopened exclusively for legitimate pre-exploit holders. He added that Resolv and its partners are continuing to trace what he described as “bad USR” while preparing a full post-mortem report. The selective reopening of redemptions is intended to limit further harm while the investigation proceeds.
The incident has drawn comparisons to the collapse of the Terra ecosystem in 2022, when the Terra USD algorithmic stablecoin entered a death spiral that erased tens of billions of dollars in value. That event fundamentally reshaped regulatory and risk perceptions surrounding stablecoins across the industry. The USR depeg has revived those concerns among market participants and protocol operators alike.
Pearl described the USR depeg as having “opened a Pandora’s box,” pointing to roughly $180 million in liquidations on lending protocol Morpho and approximately $334 million in outflows from lending and liquidity platform Fluid. He noted that overall spillover remained limited but said nervous stablecoin issuers are now revisiting their assumptions about peg reliability. Many stablecoin platforms, he said, are deeply unsettled by the exploit.
Pearl also warned of broader systemic risks given how deeply decentralized finance has become intertwined with stablecoins. While protocols can sometimes absorb hacks and continue operating, he cautioned that a serious failure at the stablecoin layer “can finish the company.” The USR collapse, he said, has placed that risk back into sharp focus for the wider DeFi industry.
Originally reported by CoinTelegraph.
