A stablecoin is meant to hold a value of one dollar. Abracadabra’s own plan to close down, however, would return only about 4 cents per token to holders of Magic Internet Money.
The team behind the lending protocol wants to shut down both Abracadabra and its MIM stablecoin. According to the proposal, it has identified roughly $21 million in bad debt, and most of the remaining collateral would be liquidated into ether.
Where the 4-cent figure comes from
The proposal is blunt about the figures. In the team’s words, a string of hacks has left MIM “severely under-backed with no viable path back to parity.”
The collateral securing MIM debt comes to about $1.2 million. Around $300,000 of it is locked in an immutable Arbitrum WETH cauldron, where the interest rate can’t be adjusted. That leaves the team with about $900,000 it can actually work with.
Close to $22 million worth of MIM is held outside protocol addresses. The team described the gap as “approximately $21m of bad debt,” and added that “MIM’s effective backing is below $0.04 (>95% unbacked).”
Traders had mostly priced this in already. On Wednesday, MIM changed hands at around $0.029, which is lower than even the backing level the proposal cites.
Only two wallets have voted
The Snapshot vote opened on Sept. 29 and ends at 1:24 p.m. ET on Wednesday. By Wednesday morning, just two wallets had taken part.
The wallet that submitted the proposal voted in favor with around 100 million in voting power. A second wallet voted against with about 523,000. So far the proposer holds roughly 99.5% of all votes cast, and there’s little doubt about how the vote will end.
Abracadabra has seen a one-sided vote like this before. In June, almost four months ago, a proposal gave operational stewardship and treasury management to a group led by an entity called Anubis. Only two wallets voted on that proposal as well.
How holders and borrowers would be paid
Abracadabra calls its lending markets cauldrons. The plan would have the protocol withdraw collateral from them, convert it to ether, and hand it out through a Merkl contract.
Borrowers effectively come first. Each would get the value of their collateral minus their MIM debt, and that debt would be valued at $1 per MIM. MIM holders would then share whatever is left, pro rata.
The $1 valuation is important. Borrowers settle their debt at face value while holders get back pennies, so people who borrowed MIM end up in a very different spot from people who held it.
Once all the collateral has been swapped, and not before Oct. 15, the team will take a snapshot of MIM balances and cauldron positions. MIM holders who don’t claim within six months lose their share to the holders who did claim, up to $1 per MIM. Any funds still left over after that go to borrowers.
Why the team ruled out raising rates
The team said it looked at the obvious alternative of raising interest rates to force liquidations and lift MIM’s price. It concluded that any bump would be short-lived and would “benefit only the fastest sellers.”
An outside deadline is also in play. LayerZero Labs is retiring its V1 relayer, and funds have to be withdrawn before Dec. 15. If nobody acts, roughly $1 million in Abracadabra’s Stargate USDC and USDT cauldrons is at risk.
SPELL holders come last
Citing legal counsel, the proposal said MIM counts as a liability that sits above the SPELL governance token. “Until this liability can be served fully, SPELL token does not retain any accounting value,” it said.
With MIM backed at less than 4 cents on the dollar, that liability won’t be “served fully.” Put simply, the proposal means SPELL holders will receive nothing.
How three exploits led here
The hacks the team mentions are all on the record. In January 2024, a $6.5 million exploit pushed MIM off its peg.
In March 2025, an attacker took about $13 million from cauldrons linked to GMX liquidity tokens. Abracadabra confirmed that exploit on X. Then in October 2025, an attacker minted about 1.79 million MIM from deprecated cauldrons, and the DAO treasury later bought those tokens back.
What comes after the vote
If the proposal passes, the protocol will shut down when the liquidation is finished. Positions in immutable cauldrons can still be withdrawn onchain, because no one is able to turn those off.
The team said it will not carry “any legal or technical responsibility to maintain the protocol.” The interface will remain online but won’t be actively maintained.
If you still hold MIM, mark down Oct. 15 and the six-month claim window that starts after it. Around 4 cents per token is a small amount, but if you don’t claim it, it goes to the holders who did.
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