Abracadabra DAO Votes to Wind Down Amid Security Failures and Looting Claims
Abracadabra proposes shutdown after stablecoin collapse
The embattled decentralized finance (DeFi) project Abracadabra has proposed an "orderly wind down." The decision follows a series of security breaches that the project says have destroyed its ability to maintain the value of its stablecoin, Magic Internet Money (MIM). A stablecoin is a type of cryptocurrency designed to keep a steady value, usually pegged to the US dollar.
The proposal states there is "no viable path back to parity" for MIM. As a result, the token is currently trading at approximately $0.04, far below its intended $1.00 value. The vote on the shutdown plan closed on Wednesday evening with overwhelming support from voters.
Key figures behind the collapse
- The protocol once managed $6 billion in value but now faces $21 million in bad debt.
- There are 22 million outstanding MIM tokens with only $900,000 in usable backing assets.
- The shutdown vote received 100 million SPELL votes in favor and just 0.5 million against.
- Recent hacks in January, March, and October 2025 contributed significantly to the losses.
History of security failures
Abracadabra launched in 2021 but has struggled with reputation and safety issues ever since. In 2022, the project suffered a major blow when 0xSifu, a figure linked to its founding, was identified as Michael Patryn, a co-founder of the failed Canadian exchange QuadrigaCX. That same year, a strategy involving the UST stablecoin wiped out roughly $1 billion of Abracadabra's total value locked (TVL).
Security incidents continued into 2024 and 2025. A hack in January 2024 stole $6.5 million. Two additional attacks occurred in March and October 2025, taking another $13 million and $1.7 million respectively. These events left the protocol unable to cover its obligations.
Critics allege treasury mismanagement
Not everyone agrees that a simple shutdown is the right conclusion. Mikko Ohtamaa, a co-founder of Trading Strategy, called the move "treasury looting." He pointed to transactions made by the project's governing body (DAO) earlier in the year.
Data shows that on June 8 and 11, large amounts of MIM were sold on the Curve exchange while the token was already losing its value. These sales reportedly netted sellers about $0.5 million. Additionally, in July, over $8 million in assets were moved from the project's wallets to a Binance deposit address and an unlabelled address. The wind-down proposal does not mention these funds or include them in the calculation for redeeming MIM tokens.
Broken promises before the vote
In early July, less than three months before the shutdown vote, the project's official X account promised a new roadmap to restore the MIM peg and improve protocol health. The account has not posted any updates since that announcement. The current proposal claims there is no perspective of ever getting the protocol to function again.
What remains uncertain
While the vote to shut down passed, it is unclear what will happen to the $8 million in assets moved in July. The proposal calculates redemption based only on the remaining "actionable" collateral, ignoring the transferred funds. Critics argue this leaves many stakeholders without recourse for the missing assets.
Related industry closures
Abracadabra is not the only long-running project ending operations recently. Balancer, another DeFi protocol, also voted to cease operations following a $130 million hack. BAL holders in that project will receive a share of the remaining treasury starting next May.
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