Wildcat Labs Faces First Default as Ethereum Kinto Shuts Down

- Wildcat Labs reports first loan default from shuttered Ethereum L2 Kinto. - Protocol's design isolates financial contagion, shielding other loans from losses. On September 8, 2025, Wildcat Labs announced the first loan default on its decentralized lending protocol, which occurred after Ethereum Layer 2 platform Kinto failed to meet its obligations. The platform emphasized that its lending structure successfully prevented financial contagion across other loans, as the design isolates losses within specific loan facilities. According to a September 8 report from The Block, Kinto plans to cease operations by the end of the month. The decision follows a $1.55 million exploit earlier this year that drained the company’s lending pools. The company’s recovery effort, the "Phoenix Facility," which sought to issue new debt to cover losses, ultimately proved unsustainable for ongoing financing. Wildcat Labs highlighted that its undercollateralized lending model isolates risk within specific facilities like the Phoenix Facility, thereby shielding other parts of its platform from cascading failures. As a result, the incident serves as a case study for the protocol’s capacity to mitigate systemic financial risks while preserving platform stability. Ramón Recuero, Kinto’s founder, acknowledged the setback for lenders participating in the Phoenix Facility, who are expected to recover approximately 76% of their principal from Kinto's remaining assets. In a related development, Wildcat confirmed it plans to take legal action against the exploit’s perpetrators to recover unpaid balances.