What’s happening to DeFi? $231M was just drained but $19M clawed back

Two headlines hit the internet within hours of each other this week, and together they map the current state of DeFi’s security theater.

StakeWise DAO executed contract calls to recover approximately $19.3 million in osETH, along with $1.7 million in osGNO, from the Balancer V2 exploit that drained between $110 million and $128 million across multiple chains.

At the exact moment, Stream Finance froze deposits and withdrawals after an external fund manager disclosed a loss of $93 million, sending its staked stablecoin, xUSD, into a depeg that climbed somewhere between 30 and 50 cents on the dollar.

A story shows the DeFi defense toolkit finally working at speed; the other exposes the fragility that remains when protocols externalize risk to opaque counterparties.

The contrast is not cosmetic. The partial recovery of StakeWise of about 15% of the total Balancer the loss came from levers that DeFi has spent years building: emergency multisigs, contract-level clawbacks, and DAO governance structures that can move capital in a matter of hours.

The collapse of Stream can be traced to a structural bet on hybrid CeDeFi, which consisted of agricultural returns through an external manager without real-time risk dashboards or transparent collateral monitoring.

The $93 million disappeared off-chain, beyond the reach of any smart contract or validator coordination. What worked and what broke both matter because they define the menu of tools available when the next exploitation of nine figures lands.

Balancer confirmed the incident on November 3rd, targeting V2 Composable Stable Pools.

Accounts of the losses evolved as investigators traced the discharges through the chains of custody. The protocol offered a white hat reward of up to 20%, hoping to convert the attacker into a bug hunter with a payday.

Berachain, which runs Balancer-style pools on its native DEX, moved faster: validators performed a coordinated network shutdown, performed an emergency hard fork to isolate vulnerable contracts, and resumed operations with the contained exploit.

The maneuver consists of a pause and a rollback, something that only works when a chain is young and centralized enough to coordinate validator action without a governance block.

StakeWise’s playbook provides the most compelling evidence that DeFi’s emergent architecture can withstand intense pressure.

The DAO’s multisig triggered contract calls that returned 5,041 osETH and 13,495 osGNO to the protocol controller.

The team commits to pro-rata distributions based on pre-exploitation balances, turning a catastrophic loss into a partial haircut.

This is not theoretical: the funds have moved on the chain, the DAO has published the plan publicly, and many outlets have corroborated the figures. Speed ​​matters as much as result.

Traditional financial recovery can take months of litigation and often yield only pennies on the dollar. StakeWise executed in days, using tools native to the protocol.

The toolbox and its limits

Three mechanisms make StakeWise recovery possible: emergency multisigs with strict and predefined powers, contract-level clawback functions that allow governance to undo specific transactions, and a DAO structure capable of voting and executing in a single block cycle.

Berachain has added the fourth option of intervention at the chain level through validator consensus. Together, these tools allow partial and rapid recovery.

They don’t prevent exploits, but they create a credible ex-post response that narrows the attacker’s window of time and reduces the payout.

The limits are immediately apparent in the numbers. StakeWise recovered $19.3 million from a $128 million drain, representing about 15%. Balancer’s white hat reward remains unclaimed at press time.

Berachain’s rollback protected its own ecosystem, but was unable to undo transactions on the ethereum mainnet or other affected chains.

Every lever that DeFi pulled worked, and users even absorbed $100 million in losses. The toolbox is not empty, but it is still not enough to stop a determined and sophisticated attacker who understands the protocols better than auditors.

Stream Finance exposes the architectural flaw that no amount of chain tools can fix. The protocol disclosed that an external fund manager lost approximately $93 million, prompting an immediate freeze on deposits and withdrawals.

Stream hired Perkins Coie to investigate, but the damage had already spread. The protocol’s stakecoin, xUSD, depegged sharply as price trackers and newsrooms reported intraday lows between 50% and 70% of their nominal value.

The mechanics differ from a smart contract exploit, as no attack drained a pool, no validator coordination could reverse the loss, and no DAO vote could hit the funds held off-chain by a third-party manager.

This is the CeDeFi compromise in its rawest form. The protocols promise the composability of DeFi and transparency in the chain while the performance of agriculture through traditional fund managers operating under completely different risk frameworks.

When the external manager fails, whether due to fraud, operational error, or market losses, the stablecoin backed by that capital loses its peg, and the protocol has no emergency lever to pull.

Users discover too late that their “decentralized” stablecoin depended on trusting an entity they’ve never seen, operating in a jurisdiction they can’t reach, on terms they’ve never reviewed.

Second order mathematics

The existence of emergency multisigs and clawback functions raises the bar to exploit victims, as no recovered value is anymore the default; however, it also creates a moral hazard.

Protocols can invest not in security audits, reasoning that governance can sustain losses ex post. Regulators should take note: if DAOs can reverse transactions and freeze funds, they effectively control the network in a way that resembles fiduciary duties.

That invites policy pressure for proof-of-reserve dashboards, mandatory risk disclosures, and stricter licensing for anything labeled “decentralized.”

For investors, the due diligence premium has just increased. Performance products built on opaque external managers or CeDeFi hybrid structures now carry a new risk: catastrophic, unrecoverable losses that break stablecoin pegs.

Real-time risk dashboards, transparent collateral monitoring and on-chain proof reserves stop being nice-to-haves and become table stakes. Protocols that cannot or will not publish these metrics trade at a discount, and rightfully so.

The macro background sharpens the stakes. Chainalysis has counted more than $2.17 billion in crypto thefts by mid-2025, already surpassing the total for the year 2024, with projections pointing to $4 billion if current trends continue.

DeFi is not the only target, but it remains the most liquid and the most vulnerable among them. Each exploit tests whether the ecosystem has built defenses that scale faster than the attack surface.

Who decides the outcome?

The Balancer-StakeWise-Stream sequence is not unique. It’s a stress test of two competing visions for the future of DeFi.

One side is betting that emergency governance, contract-level controls and coordination of validators can create a credible defense that narrows the window for attackers and limits losses.

The other part embraces hybrid structures that trade transparency on the chain for performance off the chain, accepting counterparty risk as the price of competitive returns.

Both visions coexist today, and users allocate capital between them whenever they choose a protocol.

What is at stake is not whether there are exploits, but whether DeFi can defend itself enough to be a credible alternative to traditional finance. The recovery of StakeWise proves that the tools exist. The collapse of the Stream proves that it does not cover the entire attack surface.

The next exploit of $100 million will fall into one of these two buckets, and the result will depend on which architecture the protocol chose months or years before the attacker’s arrival. The market will see who survives intact.