# K3 Capital Threatens Legal Action Against Elixir Over deUSD Depeg

*Author: Jack Inabinet*
*Published: Nov 7, 2025*
*Source: https://www.bankless.com/read/news/k3-capital-threatens-legal-action-against-elixir-over-deusd-depeg*

---

Crypto-native DeFi risk management group K3 Capital is threatening legal action against deUSD stablecoin issuer Elixir, alleging a "coordinated fraudulent scheme" orchestrated by Elixir and facilitated by [now-insolvent](https://www.bankless.com/read/news/stream-finance-goes-belly-up-retains-perkins-coie-llp) tokenized yield fund Stream Finance in a [post](https://discord.com/channels/742749441697513632/1353400194183594045/1436365942727639182) on the Euler Discord.

### **What's the Scoop?**
- **Contagion Background: **On November 3, Stream Finance – a tokenized yield fund that offered users above-market returns on their USDC, BTC, ETH, and EURC – [disclosed](https://www.bankless.com/read/news/stream-finance-goes-belly-up-retains-perkins-coie-llp) that an "external fund manager overseeing Stream funds" had lost approximately $93M in fund assets.
- **Elixir Collapse:** Fallout to Elixir (an exposed lender to Stream) was initially contained by claims of senior redemption rights, yet its deUSD stablecoin depegged just days later after Elixir [suspended](https://x.com/elixir/status/1986443495351927257) redemptions. At the time of writing, deUSD stablecoins were [trading](https://www.coingecko.com/en/coins/elixir-deusd) at just four cents on the dollar, marking one of the most aggressive stablecoin implosions since the collapse of Terra/Luna.
- **Strategy Swap: **Elixir initially positioned itself as a tokenized basis-trading strategy, marketed as low-risk and delta-neutral with a fully doxxed team. In late October, unbeknownst to lenders, Elixir unilaterally changed its investment mandate, lending ~$68M USDC to Stream Finance via Morpho, effectively transforming Elixir from a “basis trading” into a tokenized fund-of-funds with a completely different and riskier profile.
- **Stream Shenanigans: **In a circular fashion, Stream also utilized Elixir’s deUSD in a looping strategy that drained liquidity from lending platforms where Elixir was integrated, leaving lenders exposed when the incestuous system came under stress. 
- **Legal Action Underway:** K3 Capital says it has retained a top U.S. attorney, served Elixir founder Philip Forte with a cease-and-desist, and is preparing a civil complaint on behalf of affected lenders.

> The saga continues. [@k3_capital](https://twitter.com/k3_capital?ref_src=twsrc%5Etfw) is threatening legal action on [@elixir](https://twitter.com/elixir?ref_src=twsrc%5Etfw), claiming Elixir is a 'coordinated fraudulent scheme' orchestrated by Philip Forte (founder of Elixir) and facilitated by Caleb from Stream Finance'.K3 alledges Elixir misrepresented their product by lending… [https://t.co/WcY1D3EWWF](https://t.co/WcY1D3EWWF) [pic.twitter.com/33WZUBv5TA](https://t.co/33WZUBv5TA)— YAM 🌱 (@yieldsandmore) [November 7, 2025](https://twitter.com/yieldsandmore/status/1986829921591664873?ref_src=twsrc%5Etfw)