Moonwell, a DeFi lending protocol on Base, proposed slashing monthly interest accruing on bad debt by approximately 85% through governance proposal MIP-X66, which entered vote collection on Sept. 4. The rate changes would reduce projected monthly bad-debt interest from $338,785 to $50,273, saving roughly $288,512 per month, according to the protocol’s recovery update.
The proposal follows the Aug. 27 MAMO market incident, which Moonwell attributed to inflated collateral accounting combined with oracle-price manipulation. The incident left an estimated $9.1 million in residual borrower obligations, with $2.35 million remaining in USDC debt.
MIP-X66 adjusts interest-rate models and market risk settings across seven Base markets and proposes converting protocol-owned reserves to USDC for market recapitalization. Moonwell stated that withdrawals of protocol reserves would apply only to protocol-owned assets, without withdrawing or transferring user funds.
User Funds Remain Locked
User USDC deposits remain inaccessible. Dr_Bahmani, a forum user who deposited a five-figure USDC position through Mamo on Sept. 2, posted a governance request on Sept. 4 seeking clarity on recovery timelines and fund access. Moonwell did not announce a supplier repayment timetable or confirm whether reserve transfers have occurred.
Borrowing on Base markets would remain gated separately. The protocol said MIP-X66 could help establish conditions to consider reopening Base borrowing, but re-enablement would remain subject to further risk assessment. Moonwell did not specify what that assessment entails.
Recovery Efforts Underway
Anthias Labs, a risk adviser, published a post-mortem on Aug. 28. Zero Shadow, a security firm, has been retained to assist recovery efforts, with potential options still being evaluated, according to Moonwell’s announcement.
The projected $288,512 monthly savings measure slower growth in debt already on the books, not cash recovered, principal forgiven, or money returned to suppliers. Even under the projection, approximately $50,273 in monthly interest would continue accruing on bad debt after the rate changes take effect.
PGov, a governance delegate, has visibility into the proposal mechanics. The protocol’s recovery plan addresses bad-debt interest reduction separately from user fund access and borrowing reopening, leaving multiple elements of user recovery unresolved.
