Popular crypto lending platform shuts down amid market pressures

Pooja Rajkumari

Tue, February 17, 2026 at 9:30 AM GMT+9 3 min read

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Crypto lending began gaining traction around the 2020-2021 bull market.

The idea of borrowing or lending against cryptocurrency with speed and accessibility that traditional finance couldn’t guarantee increased its appeal.

Among the many early entrants in the space was ZeroLend, a multi-chain decentralized crypto lending protocol. It is built onzkSync, a Layer-2 (L2) scaling protocol for Ethereum (ETH).

But today it has announced it will wind down operations, citing sustainability challenges and prolonged operating losses.

The closure adds to a growing list of DeFi lending platforms that have struggled to maintain profitability in a fragmented, security-challenged environment in crypto’s lending landscape.

Related: California and Manhattan crackdown tighten pressure on crypto lenders

Liquidity declines and security pressures

In a statement shared with its community on Feb. 16, the team said that after three years of building and running the protocol, it had made the “difficult decision” to shut down.

According to the team, several blockchains that ZeroLend supported during its early growth phase have since become inactive or significantly less liquid.

In some cases, oracle providers discontinued support, making it harder to operate lending markets reliably or generate stable revenue.

Oracle providers supply real-world data, such as prices, to blockchain smart contracts and enable decentralized applications to function accurately and securely.

At the same time, the protocol faced increasing attention from malicious actors, including hackers and scammers. Combined with the inherently thin margins and high-risk profile of lending platforms, these pressures resulted in extended periods of operating at a loss.

**“Despite the team’s continued efforts, it has become clear that the protocol is no longer sustainable in its current form,” **the statement read.

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Users urged to withdraw funds

ZeroLend said its immediate priority is ensuring users can safely withdraw their assets. Most lending markets have already been set to 0% loan-to-value (LTV), and users have been strongly encouraged to remove any remaining funds from the platform.

However, some assets remain tied up on chains such as Manta, Zircuit and XLayer, where liquidity has significantly deteriorated. In those cases, funds are currently locked in positions linked to illiquid or inactive environments.

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To address this, ZeroLend plans to execute a timelock upgrade that would allow redistribution of affected assets. The move will involve updates to the protocol’s smart contracts and is aimed at maximizing recovery for users.

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ZeroLend addresses exploit incident

The team also mentioned an incident involving LBTC users on Base in February of last year.

On Feb. 23, 2025, ZeroLend’s LBTC market on Base experienced an exploit. At the time, the protocol made no public announcement.

Users flooded Discord with complaints about frozen withdrawals, but moderators reportedly attributed the issue to “high utilization” and “maintenance.” It wasn’t until late 2025 that on-chain researcher Torakapa publicly revealed what had happened.

According to blockchain data, a single wallet borrowed 3.92 LBTC across three transactions executed within 45 minutes. The attacker then bridged the funds out through Across Protocol, effectively extracting the value from the vault.

What was left behind was worthless PT-LBTC collateral.

The debt token associated with the exploit remains visible on-chain, serving as a permanent record of the transaction. However, the protocol did not immediately acknowledge the incident or classify it as a hack.

The tactics in the exploit were similar to those in other DeFi lending attacks during that period. Attackers would leverage weak collateral parameters, oracle vulnerabilities or mispriced assets to drain liquidity while leaving technically “valid” debt positions behind.

ZeroLend said in the recent post that with support from a LINEA airdrop allocation, affected LBTC suppliers on Base are expected to receive a partial refund.

Related: Another crypto lender shuts down, leaves behind a teary note

This story was originally published by TheStreet on Feb 16, 2026, where it first appeared in the Bankruptcy News & Analysis section. Add TheStreet as a Preferred Source by clicking here.

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