AlphaFi is shutting down AlphaLend, its lending protocol within the Sui ecosystem, after a misconfigured ALPHA oracle left certain borrow positions substantially undercollateralized and generated bad debt. The Sui Foundation has fully covered the resulting shortfall, keeping AlphaFi solvent and ensuring that user funds remain protected.

Withdrawals remain open while the protocol winds down, but new deposits and new loans on AlphaLend are now paused. AlphaFi and Sui announced the decision on September 25, 2026.

Why AlphaFi Is Shutting Down AlphaLend

The Sui Security Team identified the root cause as a misconfiguration involving AlphaFi's ALPHA oracle. An oracle supplies the price data that lending protocols rely on to assess the value of posted collateral, which makes feed accuracy central to how are sized: if collateral is mispriced, position checks can clear against figures that overstate the protection behind a loan. Because of the misconfiguration, certain borrow positions using ALPHA as collateral became substantially undercollateralized, meaning the pledged collateral was no longer sufficient to cover the outstanding loans. AlphaFi said the resulting bad debt required intervention from the Sui ecosystem.

Who absorbs bad debt is the decisive question for depositors, since it determines whether their claims are made whole. AlphaFi said the bad debt has now been fully covered. The Sui Foundation provided assistance to ensure the protocol remained wholly solvent, meaning users will not absorb the shortfall. AlphaFi also confirmed that both principal and generated yields remain protected.

AlphaFi is winding down in an orderly way. The protocol is in maintenance mode: withdrawals remain open, but users cannot take new loans.

— AlphaFi (strategic arc) (@AlphaFiSUI) September 25, 2026

Maintenance Mode During the Wind-Down

AlphaFi is winding down in an orderly fashion and has placed AlphaLend into maintenance mode. In this state, AlphaLend no longer operates as a live lending market; unwinding positions and withdrawing assets are the remaining interactions available to users. Users cannot supply new assets or take out new loans from the protocol. Existing borrowers have been asked to unwind their positions and withdraw their assets. Withdrawals remain available throughout the period while AlphaFi completes the shutdown process.

Slush Strategy Withdrawals

The shutdown also affects users accessing strategies through Slush. AlphaFi said users can now withdraw funds directly through Slush Wallet.

The WAL vault lock period has been removed, allowing users to withdraw without waiting, and withdrawals from SUI, WAL, DEEP, and USDC strategies now arrive instantly. Users with pending withdrawal requests should cancel those requests and submit new ones; AlphaFi said this process allows funds to arrive in wallets immediately.

The ALPHA vault has also been discontinued — the same token whose oracle misconfiguration sat at the center of the incident. Its lock period has been removed as well, meaning users can withdraw ALPHA at any time.

AlphaFi added that it will support the Sui Foundation's investigation and remediation efforts, including providing records, technical assistance, and support for recovering the amounts owed. That recovery work remains an open thread as the wind-down proceeds.

Following the Sui Security Team's identification of and assistance with the resolution of @AlphaFiSUI's misconfiguration of their ALPHA oracle and subsequent creation of bad debt, AlphaFi is winding down operation of their protocol. Sui Foundation has made the decision to…

— Sui (@SuiNetwork) September 25, 2026

Security Tooling to Become Publicly Available

The Sui team also said its security tooling helped identify the oracle misconfiguration. After its formal launch later this fall, the tooling will become available publicly to Sui DeFi protocols — putting the same class of detection that surfaced this incident in reach of other teams building on the network.

AlphaFi plans to continue the wind-down until the final user has withdrawn. Once that process concludes, AlphaFi will no longer operate within the Sui ecosystem, leaving the shutdown's completion dependent on redemption activity rather than a fixed date.

The key mechanism behind the shutdown was an ALPHA oracle misconfiguration that weakened collateral coverage and produced bad debt from undercollateralized loans. Sui Foundation funding absorbed the resulting shortfall, while open withdrawals across AlphaLend and Slush-linked strategies allow users to recover their assets before the protocol ceases operations.