Sui's eco-lending protocol AlphaFi announced its closure and is now in a state of maintenance

Sui eco-lending protocol AlphaFi announced on September 26 that it would be shut down in an orderly fashion, and has now entered maintenance mode. The withdrawal channel remains open but no longer accepts new deposits and loans. The announcement disclosed that there was a severe mortgage shortage of loan positions secured by ALPHA as collateral in some parts of AlphaLend, leading to bad debts; the Sui Foundation security team worked with project parties after discovering this situation.

Shutdown Arrangement: Cashing out is the current priority

According to the announcement, users should clear their positions and withdraw assets as soon as possible. Slush Strategies users can now directly withdraw funds from Slush wallet , WAL vault lockdowns have been cancelled, SUI, WAL, DEEP and USDC strategies are available for immediate cash out; ALPHA vaults have also ceased operation and regular locks have been canceled.

This means that funds previously restricted by the locked cycle have been restored to liquidity, and users do not need to wait for the original expiry date to operate. For those who still hold AlphaLend positions, timely clearing is a key step in avoiding subsequent operational obstacles due to complete suspension of agreements.

Where does the bad debt come from: ALPHA mortgage position under-mortgaged

The immediate trigger for the shutdown was a severe under-collateralization of AlphaLend's borrowing positions, which were partially collateralized by ALPHA. This risk is not uncommon in lending agreements and can be magnified when there is less liquidity and greater price volatility as collateral for the project itself.

It is worth noting that the Sui Foundation security team intervened after discovering this issue and dealt with it in collaboration with AlphaFi project parties, which ultimately led to a full coverage of bad debts. This disposal method was uncommon for similar events where most lending agreements went bankrupt.

What it means for Sui's ecology

The shutdown of AlphaFi is another example of DeFi protocol exit in the Sui ecosystem. For ordinary users, the most immediate impact is that anyone who has deposits, loans or strategic positions in AlphaFi or AlphaLend needs to actively operate withdrawals instead of waiting for the protocol to be automatically processed. Although withdrawal remains open, but after the protocol enters maintenance mode, its functionality is limited.

For Sui Ecology as a whole, the handling of this incident sends two signals: one is that there are structural risks in the model of an intra-ecological loan agreement with its own token as the main collateral; and secondly, that the Foundation has the ability to intervene and coordinate after risk exposure. However, no public information can be confirmed whether this will form a normalized underlying mechanism.

Follow-up

Users should pay attention to any subsequent withdrawal deadlines or feature adjustment notices posted on AlphaFi's official channels. Slush Strategies' immediate cash-out arrangements are valid for the long term, as well as the latest official announcements. For users who still use other lending protocols in the Sui ecosystem, this event provides a verifiable reference: The composition and liquidity of collateral is often more worrisome than the surface rate of return.