Alchemix Debt-Forgiveness Incident
Initial backing shortfall
$6.5M
Accidental debt forgiveness
What happened
On June 16, 2021, an Alchemix deployment error caused a harvest to erase borrowers' alETH debt. Borrowers could withdraw collateral that should still have secured their loans, leaving an alETH backing shortfall initially reported at 2,688.634 ETH, approximately $6.53 million. This was accidental debt forgiveness; Yearn's vault was operating correctly.
Technical root cause
An incorrect vault index in the deployment caused Transmuter backing to be counted toward debt repayment.
How it happened
- The deployment script created additional vaults, and the Alchemist referenced the wrong vault index.
- The resulting reward calculation sent Transmuter funds toward repaying user debt.
- Debt cancellation allowed collateral withdrawals and reopened capacity for additional alETH borrowing.
- Alchemix paused minting and proposed fresh vault and Transmuter deployments, treasury support and voluntary returns.
Protocol details
Classification
Protocol Logic / Accounting Error
Protocol Type
Synthetics
Affected asset / contract
ALCX
Implementation language
Solidity
Protocol links
Website
@AlchemixFi
Security review history
- Runtime Verification View report
Evidence
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