Mu Digital winds down key DeFi products; major AZND borrower holding 59% of supply is already liquidatable on Morpho.
DeFi & Yields ·
Mu Digital initiated an immediate orderly wind-down of its products—AZND, loAZND, and muBOND—citing a surge in redemption requests and heightened market uncertainty. The company cited recent commentary and broader protocol developments as contributors to the decision. Mu Digital stated it is engaging legal counsel and advisors to structure the wind-down process, determine treatment of outstanding positions, and establish redemption mechanics in line with contractual and legal obligations.
The timing presents immediate risk for AZND holders. On-chain data from Morpho's lending market indicates a single borrower controls 9.57 million AZND tokens—approximately 59 percent of circulating supply—collateralized by 8.55 million USDC. That position already meets liquidation criteria, leaving the token vulnerable to cascade effects should the borrower be unable to maintain collateral ratios during the wind-down period.
Mu Digital has committed to publishing further details through official channels, but the mechanics for unwinding AZND and loAZND positions remain unspecified. The concentration risk in Morpho's market and the timing of the wind-down announcement leave open questions about redemption sequencing, potential haircuts, and whether lenders or early withdrawers will bear losses differently.