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Sonic Incident Post-Mortem & Next Steps

  • Writer: Minh Nguyen
    Minh Nguyen
  • Nov 13
  • 5 min read

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1. What Happened?


On November 3, 2025, Stream Finance, a yieldcoin protocol backed by on-chain and off-chain strategies, disclosed that an external fund manager had lost approximately $93M of its collateral, affecting Stream’s xUSD, xEUR, xBTC, and xETH tokens.





This triggered immediate depegs of Stream-issued tokens and widespread contagion across many chains with significant Stream presence, including Ethereum, Arbitrum, Avalanche, Plasma, Plume, and Sonic.



Sonicnetwork, in particular, had roughly $24M xUSD in circulation — more than half of the chain’s USD-denominated yieldcoin market cap.



Trevee (formerly Rings), a major Sonic-native stablecoin and yield protocol, has significant exposure to xUSD and xETH through lending vaults curated by MEV Capitalon Euler. As a result, Trevee’s wstkscUSD (Wrapped Staked Sonic USD) and wstkscETH (Wrapped Staked Sonic ETH) tokens are heavily impacted, and their redemptions have been paused by the Trevee team.





dTRINITY also has indirect exposure to the Stream incident through Trevee:


  • 211K Sonic dUSD is backed entirely by 225K wstkscUSD

  • Trevee assets make up 70% of supplied collateral in dLEND on Sonic



Fortunately, thanks to dTRINITY’s chain-isolated reserve architecture, the contagion on Sonic did not spread to its deployments on other chains. dUSD and dLEND are completely unaffected on Fraxtal and Katana.



2. How Did It Happen?


Without full details from the ongoing investigation into Stream, we suspect the root cause likely traces back to the October 10 crypto market downturn, during which Stream’s external fund manager could have suffered undisclosed losses.





Compounding the issue was Stream’s poor operational and proof-of-reserve transparency. Many are also accusing the Stream team with allegations of fraud.

When the losses were finally revealed on November 3, market confidence collapsed overnight, a bank-run began on Stream assets, and any protocol exposed to Stream directly or indirectly faced sudden contagion.



3. Why Did It Happen?


In May 2025, dTRINITY expanded dUSD and dLEND on Sonic network, with fully chain-isolated reserves. For each chain expansion, dTRINITY only selects the top assets in that ecosystem as its collateral. Due to limited options on Sonic, Trevee assets naturally became a practical integration choice for dTRINITY.



  • Trevee was the largest, most liquid Sonic-native stablecoin project.

  • Trevee assets are backed by strategies from risk-curated vault platforms like Veda and MEV Capital, with over $120M TVL at one point.

  • Trevee is one of the few ecosystem projects whitelisted for Sonic Point incentives by the Sonic team.



Thus, wstkscUSD was added as a reserve asset for Sonic dUSD since the start. wstkscUSD, wstkscETH, and Pendle PT-wstkscUSD were eventually added as collateral for Sonic dLEND.



However, wstkscUSD’s and wstkscETH’s underlying funds (scUSD and scETH) were allocated by Trevee to MEV-curated Euler vaults, ultimately lending against Stream-issued collateral.





According to Trevee, the vaults’ exposure to Stream assets was intended to be limited— for example, a 20% xUSD cap in the scUSD vault. In the lead-up to November 3, it surged past 90% due to high borrowing demand by users de-risking from xUSD exposure.

When Stream collapsed, Trevee assets also depegged. Market liquidity quickly dried up, and users redeemed all non-Trevee reserve assets — causing Sonic dUSD to be backed entirely by impaired wstkscUSD. Additionally, dUSD loans became under-collateralized in dLEND.



4. Who Are Impacted?


  • Fraxtal & Katana Users: Not impacted; 100% SAFU.

  • Sonic dUSD Holders: Impacted due to devalued wstkscUSD reserve. Sonic dUSD last traded at $0.34 on Curve (-66%).

  • Sonic dUSD Lenders: Impacted due to bad debt from devalued Trevee collateral in dLEND. With utilization currently at 100%, lenders are unable to withdraw dUSD until more borrowers repay.



5. Recovery Plan for Sonic Users


dTRINITY is working closely with Trevee as it pursues recovery from Stream through legal channels. To support affected users during the recovery process, the core contributor team is taking the following immediate actions:



Protocol Adjustments on Sonic


  • Borrowing rates on dLEND have been set to 0%

  • Minting/redeeming/staking dUSD have been disabled

  • Unstaking dUSD is still available if there’s liquidity in dLEND

  • dLEND deposits have been disabled; withdrawals and debt repayments remain open

  • wstkscUSD’s and wstkscETH’s oracles will be hardcoded to $1 and 1 ETH, respectively, until there are further official announcements from Trevee



Core Contributor Donations


dTRINITY’s core team and contributors currently hold 150K Sonic dUSD + 156K wstkscUSD.

  • 150K dUSD from the team will be donated/excluded from redemption so pro-rata recovery can flow to non-team dUSD holders. This reduces circulating dUSD eligible for recovery from 211K to 61K,backed by 225K wstkscUSD.

  • 156K wstkscUSD from the team will also be donated so pro-rata recovery can go toward covering bad debt on dLEND.



Recovery Scenario


Early indications suggest a partial recovery on wstkscUSD and wstkscETH is possible, though the exact amount and timing remain uncertain as Trevee continues coordinating with Stream’s legal team and counterparties.



Assuming Trevee is able to recover (hypothetically):


  • $0.30 on the dollar for wstkscUSD

  • 0.50 ETH on the ether for wstkscETH

Recovery estimate for Sonic dUSD holders:

  • Non-team holders = $61K nominal → $18.3K recovery

  • Team donation = $150K nominal → $45K recovery

  • Total estimated recovery = $63.3K (more than 1:1)

Recovery estimate for Sonic dLEND:

  • Impaired collateral = $199.6K + 9.38 ETH nominal → $58.8K + 4.69 ETH recovery (or $75.1K total based on current ETH price)

  • Team donation = $159.1K nominal → $47.7K recovery

  • Estimated debt against bad collateral = $169K nominal

  • Net bad debt = $46.2K

New Sonic dT Points Program

Affected users who still hold dUSD or dUSD deposits in dLEND on Sonic will earn extra dT Points, starting on November 17.

  • 3M total points distributed daily (up from 1M)

  • 80x to dUSD lenders in dLEND, 20x to dUSD Curve LPs

  • Note: team wallets are blacklisted from earning points



6. Moving Forward


This incident reaffirmed one of dTRINITY’s core principles: chain-isolated reserves. That design shielded 80% of protocol TVL from the contagion on Sonic, protecting its users on other networks.



At present, the dTRINITY team is focused on maximizing recovery for affected users. We are evaluating multiple options to expedite the process and will continue to provide transparent updates to the community along the way. For questions or support inquiries, please join our Discord channel.



The hard lessons learned on Sonic underscore the importance of strategic restraint when expanding into emerging blockchain ecosystems. As a result, dTRINITY’s near-term growth efforts will concentrate on Ethereum (launching this December), where dUSD will be backed exclusively by top-tier reserve assets such as sUSDS and sfrxUSD. Likewise, dLEND on Ethereum will only support blue-chip collateral like ETH, WBTC, wstETH, sUSDS, sfrxUSD, etc.



While our growth initiatives on Fraxtal and Katana will continue, new expansions to frontier chains (including Ronin) will be deprioritized to ensure we build the most resilient and sustainable protocol possible on Ethereum and existing networks. Our Sonic expansion will also be halted during the recovery process.



Finally, we want to express our deep gratitude to the dTRINITY community for your patience, understanding, and unwavering support. Moments like these remind us that resilience is not only built in code, but also in the strength of the dGENS who believe in our mission.



Thank you for standing together with us ❤️



Onward! (▲)





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Disclaimer: dTRINITY is not available to residents of Canada, Iran, North Korea, Russia, the USA, the UK, and other restricted regions.



The information contained herein should not be considered legal, business, financial, or tax advice. Past performance is not indicative of future results. Digital assets and DeFi protocols carry significant risks, including the potential for complete loss of funds. By using dTRINITY, you acknowledge and accept these inherent risks. View our full Disclaimer and Terms to learn more about the risks involved.

 
 
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