The team behind Abracadabra has put forward a plan to shut down the decentralized lending protocol and its stablecoin, Magic Internet Money (MIM), following a series of major security breaches and financial setbacks. If approved, the proposal would see MIM holders recover around $0.04 for each token.
Proposal Details and Voting
A vote on the proposal began on September 29 and is scheduled to close at 1:24 p.m. ET on Wednesday. Two wallets had voted by Wednesday morning. The proposer exercised roughly 100 million in voting power in favor of the shutdown, while a single opposing wallet cast about 523,000 against it. The result so far heavily favors the plan, with the proposer holding almost all voting power cast to this point.
In explaining the shutdown initiative, Abracadabra’s team cited repeated hacks that left MIM severely under-collateralized with little prospect of restoring its $1 peg. Of the roughly $1.2 million in collateral backing outstanding MIM debt, about $300,000 is locked in an immutable Arbitrum WETH cauldron whose interest rate cannot be altered. This leaves only $900,000 in collateral that the team can use. With almost $22 million of MIM circulating outside protocol addresses, the team estimates nearly $21 million in bad debt and claims that over 95% of MIM is unbacked.
MIM’s effective backing is below $0.04, with over 95% of its supply uncollateralized, and no viable path remains to restore the stablecoin’s parity.
As of Wednesday, MIM traded near $0.029, according to CoinGecko.
Repayment and Liquidation Plan
According to the outlined plan, the protocol will reclaim collateral from its lending pools—known as cauldrons—convert it into ether, and distribute it using a Merkl contract. Borrowers will be able to redeem their collateral, subtracting their MIM debt at a rate of $1 per MIM, while MIM holders will receive a pro rata distribution of the remaining funds.
A snapshot of MIM balances and cauldron positions will be taken after all collateral conversions, with no snapshot occurring before October 15. Holders who fail to redeem their share within six months will forfeit their portion, which will then be redistributed to those who claimed, up to $1 per MIM. Any surplus beyond that limit will go to borrowers.
The team considered raising interest rates to trigger liquidations in hopes of improving MIM’s price, but determined this would only temporarily benefit the fastest sellers. Additionally, LayerZero Labs’ planned retirement of its V1 relayer by December 15 adds urgency, as about $1 million held in Abracadabra’s Stargate USDC and USDT cauldrons must be withdrawn before this deadline.
Mini dictionary: Merkl contract, an onchain tool that allows for scalable and transparent distribution of assets to multiple recipients based on predefined rules.
Legal Position and Historical Incidents
Legal counsel noted in the proposal that MIM liabilities take precedence over the SPELL governance token, which will hold no accounting value until all MIM obligations are met. The proposal follows a June vote in which the Abracadabra community handed control and treasury management to a group led by the entity Anubis. That decision, too, saw votes from only two wallets.
Abracadabra had suffered repeated security incidents prior to this move. In January 2024, a $6.5 million exploit caused MIM to lose its peg. Another attack in March 2025 drained $13 million from cauldrons containing GMX liquidity tokens. A further breach in October 2025 resulted in the unauthorized minting of 1.79 million MIM, which the DAO treasury subsequently bought back.
| Exploit Date | Value Lost | Type |
|---|---|---|
| January 2024 | $6.5 million | MIM Peg Loss |
| March 2025 | $13 million | GMX Cauldron Attack |
| October 2025 | 1.79 million MIM minted | Deprecated Cauldron Mint |
Future Outlook
If the plan receives approval, the protocol will halt operations following the liquidation process. However, users will still be able to withdraw funds from immutable cauldrons onchain. The Abracadabra team stated it will not assume legal or technical responsibility for maintaining the protocol, and the platform’s interface will remain online but without active support or development.
