Kash Dhanda, a key executive at Jupiter, has publicly acknowledged that social media claims advertising Jupiter Lend's vaults as having "zero risk of contagion" were not accurate. The admission came in a video statement on Saturday, following significant criticism from the community and rival protocols like Kamino and Fluid. Dhanda stated, "There was a social media post that came out in which we said that there was zero risk of contagion because of the isolated vaults. That was not a hundred percent correct." The controversial posts have since been deleted.
The core of the dispute revolves around Jupiter Lend's use of rehypothecation, a practice where deposited collateral is reused elsewhere in the protocol to enhance capital efficiency. While Jupiter and its infrastructure partner Fluid argue that vaults are "isolated" in terms of their unique configurations (like loan-to-value ratios and liquidation penalties), critics contend that any rehypothecation inherently creates interconnected risk. Marius Ciubotariu, co-founder of Kamino, criticized the structure, stating, "In Jupiter Lend, if you supply SOL and borrow USDC, your SOL gets lent out to loopers... You take all the risk of those loops or assets blowing up. There is no isolation here and full cross contamination."
The fallout has tangible consequences for Jupiter's operations and reputation. Kamino has already blocked Jupiter Lend's refinance tool from accessing its positions. Furthermore, the Jupiter DAO has paused its voting process until 2025, which Dhanda attributed to a "breakdown in trust" within the community. The protocol, which launched in August and boasts over $1 billion in Total Value Locked (TVL), now faces increased scrutiny over its risk communication and transparency practices.
Dhanda pointed to the protocol's performance during the October 10 market crash, where it reportedly sustained "zero bad debt," as evidence of its resilience. He announced that Jupiter plans to release additional documentation and an explanatory video following the Solana Breakpoint conference, which begins on December 11.
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