Moonwell Proposes $2.68M Recovery Plan After cbETH Liquidation Incident Harms 181 Borrowers on Base

TLDR:

• Roughly 181 Moonwell borrowers on Base lost ~$2.68M due to oracle-driven cbETH liquidations from Feb 14–18, 2026. 
• Moonwell will allocate ~$310,000 from its Apollo Treasury as an immediate pro-rata repayment to all affected borrowers. 
• The remaining ~$2.37M will be repaid gradually through future protocol fees and OEV revenue via Sablier over 12 months. 
• MFAM holders will convert their tokens into stkWELL at a 1:1.5 ratio, consolidating Apollo DAO into Moonwell’s primary governance.

Moonwell has released a recovery proposal addressing unfair liquidations of cbETH collateral between February 14 and 18, 2026.

The incident affected roughly 181 borrowers on Base, resulting in approximately $2.68M in net losses. Protocol behavior tied to MIP-X43, not user error, drove the liquidations.

The plan combines treasury funds with future revenue and includes a transition for MFAM holders into the WELL ecosystem.

cbETH Liquidation Recovery Targets 181 Affected Borrowers

The Moonwell team conducted a full onchain review of all liquidation activity during the incident window. Each borrower’s loss was calculated on a net basis, meaning only realized economic harm qualifies for remediation.

The methodology accounts for all cbETH collateral seized, minus the USD value of debt repaid at the time of liquidation.

The proposal was direct about what caused the harm. “These users trusted Moonwell with their assets and were harmed through no fault of their own,” the post stated.

Crucially, cbETH was repriced at $2,200 per token to correct erroneous oracle values that contributed to the problem. This adjustment ensures that repayments reflect actual market conditions rather than distorted price data.

To begin repayments promptly, approximately $310,000 will be drawn from the Moonwell Apollo Treasury. This amount will be distributed pro-rata to affected borrowers based on their individual calculated losses.

The proposal described this allocation as “an immediate good-faith remediation without jeopardizing protocol stability.”

The remaining balance of roughly $2.37M will be repaid over time through future protocol revenue. This includes net protocol fees and OEV revenue under the current fee split structure.

All repayments will be claimable through Sablier over a 12-month window, after which unclaimed rewards expire.

MFAM Wind-Down Consolidates Apollo DAO Into Moonwell’s Primary Governance

The proposal also addresses the full deprecation of Moonwell on Moonriver, which was completed on January 29, 2026. Chainlink’s decision to sunset oracle feeds on Moonriver forced a gradual reduction of collateral factors. With MIP-R38 passed, all Moonriver markets reached a 0% collateral factor, formally closing the deployment.

As Moonriver operations wind down, the Apollo DAO governed by MFAM will consolidate into the primary Moonwell DAO governed by WELL.

The proposal described the transition as “simplifying governance, aligning incentives, and closing out legacy infrastructure.” MFAM holders will convert their holdings into stkWELL at a 1:1.5 ratio, based on a snapshot taken at proposal submission.

The proposal noted that this conversion brings MFAM holders “direct exposure to Moonwell’s ongoing development on Base and future deployments, while eliminating fragmentation across governance tokens and treasuries.” The MFAM-to-stkWELL conversion will also be claimable for up to 12 months via Sablier.

By addressing both the cbETH incident and the MFAM wind-down together, the proposal aims to close out Moonriver “in a clean, accountable manner.”

The Moonwell DAO will vote separately on treasury allocation, the long-term repayment commitment, and execution authority.