Usual Money's USD0++ Turns Out to Be a Discounted Bond, Not a Dollar Stablecoin

On the evening of January 9, 2025, holders of Usual Money's USD0++ token discovered that the asset they had been treating as a dollar-pegged stablecoin was, in fact, a four-year zero-coupon bond trading at roughly $0.87. The disclosure triggered a scramble across the lending markets where USD0++ had been used as collateral, and exposed an undisclosed financial relationship between Usual's founder and one of the curators managing those markets.

Usual, a French-based protocol, had marketed USD0++ as a yield-bearing derivative of its USD0 stablecoin, pitching returns as high as 60% alongside exposure to the protocol's USUAL governance token. The token's own branding described it as "usually worth one dollar" — language that, in retrospect, was a more literal warning than most users appreciated. While USD0 itself held its peg throughout the episode, USD0++ did not: holders who wanted their dollar back immediately faced a 13% early-exit penalty, while those willing to wait would not see full redemption until the bond matures in 2028.

The practical fallout landed hardest inside lending protocols that had priced USD0++ as if it were cash. Hundreds of millions of dollars in USD0++ collateral was suddenly stuck in vaults still valuing the token at $1, with MEV Capital — a curator running several of the affected markets — at the center of the response.

How the Morpho Markets Broke

The mechanism was straightforward. Morpho lending markets had hardcoded USD0++'s price at exactly $1, letting borrowers draw down up to 86% loan-to-value against their holdings. That arrangement worked fine as long as the peg assumption held. Once Thursday's revelation confirmed USD0++ traded closer to 87 cents, the oracle feeds kept reporting a dollar anyway, turning what had been a convenient assumption into a structural bind: borrowers couldn't unwind at par, and their effective debt load only grew.

Aave founder Stani Kulechov laid out the arithmetic bluntly: "This is a very tricky situation, as if the USD0++ will be traded as a zero coupon bond, it means that the position will be under water (basically bad debt in disguise) forever because even after 4 years of the maturity." Accrued interest over that period would keep many positions submerged even once the bond finally matured. The markets' close factor stood at 100% on paper, but with redemption blocked at $1, that figure was effectively meaningless.

MEV Capital's response was to stand up a parallel market — dubbed "USD0++ Naked" — priced at the more realistic $0.87, offering trapped borrowers a path to migrate their positions at lower rates without forcing immediate repayment. The move split the community: curators clashed with users, and users clashed with each other, while MEV Capital worked to redeploy markets with corrected oracle pricing to contain the damage. Anyone still stuck in the original Morpho market had no flash-repayment option and faced locked liquidity, leaving little choice but to watch their supposed dollar holdings lose value in real time. MEV Capital has since stated that its subsequent efforts averted any bad debt for affected users, a point the firm asked to have clarified after this piece was first published.

Questions About Early Exits and Undisclosed Ties

Not everyone was caught off guard. Hours ahead of the January 9 disclosure, risk curator Gauntlet withdrew roughly $43 million from exposure — a withdrawal whose timing, relative to the announcement that followed, drew immediate scrutiny from the community.

MEV Capital's own team member, Gilga, posted publicly that the firm "knew nothing... I wish we did," framing itself as having learned of the depeg alongside everyone else and positioning its migration offer — letting borrowers move positions without immediately repaying at a steep haircut — as a good-faith response rather than advance preparation.

That claim of ignorance took on added weight once users noted that Usual's founder, known as Adli.eth, held a stake in MEV Capital through an entity called Shift Capital, a position publicly recorded on Crunchbase dating back roughly three years, to 2021. MEV Capital has maintained that it was unaware of Usual's actions in the lead-up to the depeg. Separately, on January 2, MEV Capital had raised its fees from 8% to 10%, framing the increase as a direct benefit to USUAL and USUALx holders — a week before those same holders watched their positions collapse in value.

Liquidity provider CBB publicly pressed Adli.eth to address the MEV Capital connection directly, demanding transparency about the overlap. The underlying sequence — 1:1 redemption at launch, USD0++ hardcoded at $1, 86% LTV borrowing enabled, and only then the reveal of an $0.87 bond with a 13% exit penalty or a four-year wait — left many users asking whether the structure had been designed with this outcome in mind from the start.

Warnings That Went Unheeded

The risks were not undocumented beforehand. On December 22, more than two weeks before the disclosure, researcher Paper Imperium had already flagged the structure's core problem: "Am I to understand people are signing up for 4 years of duration risk in order to access (overnight repo rate - USCY fees) * 90%?" In plain terms, users were locking capital for years in exchange for yields not far above conventional savings rates, while absorbing complexity — opaque backing assets and convoluted redemption mechanics — that made the real risk difficult to price.

Aave's Marc Zeller similarly warned that an "Un-Usual" day could arrive when paper profits evaporate and a large share of posted collateral goes with them. Researcher Fiddy's assessment focused on the reputational cost to any protocol that hosts this kind of risk on a permissionless basis: once a structure like this fails publicly, the fallout — higher risk premiums, pricier capital, eroded trust — extends well beyond the protocol that built it.

The Response

Usual's own communications in the days that followed drew further criticism. On Friday afternoon, the protocol published a lengthy statement emphasizing "transparent information" and "sustainable growth." By Friday night, it had shifted to more direct language, urging users to migrate: "Migrate your positions as soon as possible for obvious reasons. Rewards for positions in the old markets will be deprecated."

Separately, Adli.eth began facilitating liquidations personally, a role made possible by his ability to redeem USD0++ at a floor price of his own choosing. Meanwhile, MEV Capital's vaults continued to lose USDC as some traders shifted to direct lending through alternative front-ends rather than wait for an official resolution.

This account has been updated to include clarifications provided by MEV Capital regarding its role in, and knowledge of, the events described above.