Moonwell recovery plan proposes $2.68M cbETH compensation and governance shake-up on Base

Following a major cbETH collateral failure on Base, the new Moonwell recovery proposal outlines how affected users will be repaid and how governance will be streamlined.

Moonwell sets out $2.68M cbETH liquidation compensation framework

The Moonwell team has published a detailed plan to compensate users hit by unfair liquidations of cbETH collateral between February 14 and 18, 2026. Roughly 181 borrowers on Base suffered about $2.68M in net losses, after protocol behavior linked to MIP-X43 triggered liquidations unrelated to user error.

According to the proposal, losses were calculated using a strict onchain methodology. Moreover, each borrowers harm was computed on a net basis, counting only realized economic loss that can be verified from transaction data.

The review examined every liquidation during the incident window. For each account, the team considered the total amount of cbETH seized as collateral and deducted the USD value of the debt that was repaid at the moment of liquidation.

The authors of the proposal stressed user trust as a central concern. They wrote that users had entrusted assets to Moonwell and were harmed through no fault of their own, making remediation a matter of protocol accountability rather than a bailout for risky behavior.

Oracle mispricing and cbETH repricing at $2,200

The liquidation wave was tied to faulty price data, not to a sudden collapse of the underlying asset. However, the team highlighted that the core issue stemmed from erroneous oracle values that mispriced cbETH during that February period.

To correct for this distortion, the protocol has repriced cbETH at $2,200 per token for the purposes of the recovery calculation. This reference price is meant to approximate prevailing market conditions from mid-February 2026, ensuring that repayments are not skewed by bad oracle inputs.

By anchoring the repayment model to a fixed cbETH price, Moonwell aims to create predictable, transparent compensation. That said, the team framed this repricing as a technical adjustment, not as an attempt to retroactively change user positions or market history.

Immediate Apollo Treasury funding and 12-month revenue-backed repayments

To start making affected users whole, roughly $310,000 will be pulled from the Apollo Treasury as an upfront pool for victims. This capital will be distributed on a pro-rata basis to all 181 borrowers, according to each addresss individually calculated net loss.

The proposal describes this upfront disbursement as an immediate good-faith step that does not threaten the protocols solvency. Moreover, it positions the apollo treasury repayment as a way to demonstrate accountability while keeping risk parameters intact for the broader user base.

The remaining balance of approximately $2.37M will be paid out gradually through future protocol revenues. This stream will consist of net protocol fees and OEV revenue generated under the current fee-sharing structure, reflecting the idea that ongoing activity on Base should help repair past harm.

The full schedule for these protocol fee repayments and oracle-extractive-value transfers will run for up to 12 months. During this period, users are expected to receive a continuous flow of compensation that accumulates toward their calculated entitlement.

All repayments will be distributed via Sablier, using time-based streaming. However, any amounts not claimed within the 12-month window will expire, which encourages timely participation by affected addresses while capping indefinite liabilities for the protocol.

At the same time, the document clarifies that the moonwell recovery initiative will be subject to governance confirmation. The Moonwell DAO must approve both the initial treasury allocation and the long-term commitment to devote future revenue toward victims.

MFAM wind-down and consolidation into WELL governance

The proposal also addresses a separate but related milestone: the full deprecation of Moonwell on Moonriver. That shutdown formally concluded on January 29, 2026, after Chainlink decided to sunset oracle feeds on the network, forcing collateral factors to be reduced to zero over time.

With MIP-R38 now passed, all Moonriver markets sit at a 0% collateral factor, effectively closing the deployment. The team is using this moment to simplify the projects structure and retire legacy infrastructure that no longer serves its strategic focus on Base and future chains.

As part of that process, the Apollo DAO, which is governed by the MFAM token, will be consolidated into the primary Moonwell DAO governed by WELL. This merger is presented as a way to reduce fragmentation across governance systems and concentrate decision-making power into a single, liquid token.

The proposal says the transition is intended to simplify governance, align incentives, and close out older components of the ecosystem. Moreover, it frames the mfam stkwell conversion as a path to unify stakeholders around the protocols most active deployment on Base.

MFAM to stkWELL conversion and Sablier claim process

Under the terms of the consolidation, MFAM holders will be able to convert their tokens into stkWELL at a 1:1.5 ratio. The conversion will rely on a snapshot taken at the time the proposal was submitted, preserving a clear, auditable record of eligible balances.

By design, this exchange gives MFAM holders direct exposure to Moonwells ongoing development on Base and to any future deployments. However, the shift also ends the era of separate governance tokens and treasuries, folding Apollo DAO capital and influence into the main WELL-based system.

The MFAM-to-stkWELL conversion will be made available through Sablier as well, using a claim interface similar to the cbETH remediation flow. Token holders will have up to 12 months to execute their conversion; after that, any unclaimed rights will lapse.

Supporters of the change argue that consolidating governance across WELL and stkWELL will create clearer incentives, reduce maintenance overhead, and ease participation for new users. That said, the move still requires formal approval through onchain voting before it can be executed.

Next steps for Moonwell DAO and Base deployment

By tackling both the cbETH liquidation fallout and the MFAM wind-down in a single package, the proposal aims to close out Moonriver in what the team calls a clean, accountable manner. It also sets a precedent for how the protocol might respond to future oracle-related failures.

The Moonwell DAO will vote on three key items: the allocation of Apollo Treasury funds, the long-term commitment to channel future fees and OEV income toward victims, and the authority to execute the recovery plan and token conversion.

If approved, the combined compensation and restructuring initiative is expected to reshape Moonwells governance while addressing the cbETH liquidation incident that affected 181 users in February 2026. Moreover, it would signal that the protocol is prepared to use both current assets and future earnings to repair damage stemming from its own design choices.

In summary, the proposal seeks to compensate borrowers for unfair liquidations, unify fragmented governance, and refocus Moonwells roadmap around its Base deployment and future cross-chain growth.