Cap Labs, the issuer of cUSD, is under pressure after an unpopular reversal in its long-anticipated stabledrop program triggered criticism, withdrawals, and allegations of insider favoritism.
The project describes itself as a “three-sided platform for USD yield, private credit, and financial guarantees.” It currently offers nearly 5% on USDC deposits used to back cUSD. But the company’s earlier promise of “verifiable outcomes” did not carry through to the $12 million that had been set aside in February for what it called the “first-ever stablecoin airdrop” for early users.
Friday change cut the program from $12 million to $4.2 million
In an announcement on Friday, Cap said the stabledrop would no longer distribute the previously promised $12 million. The figure was revised down to $4.2 million.
The target group changed as well. Instead of rewarding early cUSD users and liquidity providers, the revised plan would focus on making whole users who lost money while holding Pendle yield tokens, or YTs.
The response was immediate and harsh. Some users called the team “scammers” and “shameless.” Others went further and linked one of the biggest YT-buying addresses to QiDAO’s “Working capital account 2,” a reference to founder Benjamin Peillard’s previous project.
Backlash showed up on-chain
The fallout was not limited to social media. According to the report, roughly $23 million has been withdrawn so far, with funds falling from $80 million to $57 million.
There is still $11 million of instantly available liquidity left through the steakhouse and gauntlet vaults. A post circulated on X alongside the withdrawal data said that “again, there is nothing structurally wrong with the loans or backing.”
Peillard apologized and pushed back on the allegations
In a post on X on Monday, Peillard apologized for what he described as the “mistake” of promising $12 million based on an unconfirmed $250 million valuation.
He restated the reasoning behind the revised approach, writing that “nobody would take a loss, but at the same time, nobody would make a profit.”
The same post also addressed accusations of self-dealing. Peillard said the wallet accused of receiving preferential treatment belonged to an “old colleague who is not affiliated with Cap… [but] is still a close friend.”
That explanation has not settled the issue for many critics. The address in question minted the ENS handle megaben.eth two years ago, then transferred it to another address that later minted caplabs.eth.
Another user questioned the timing of the wallet’s YT accumulation, arguing that it would have earned “substantial profits” under the original stabledrop criteria before the plan was announced publicly.
cUSD has fallen sharply from its January peak
cUSD reached more than $400 million near the end of January, shortly before the original stabledrop was announced. It now stands at around $62 million.
Cap is now trying to contain the damage from the policy reversal as questions continue over the reduced payout, the redistribution of benefits, and the wallet activity tied to the controversy.