DeFi Drama on Solana: Withdrawal Delays Spark User Frustration as Founder Calls The Arena a ‘Small Beta’

If there’s one thing that never disappoints in crypto, it’s drama. And lately, The Arena, a leverage playground on Solana built on top of MarginFi, has been serving it in spades. 

What started as an exciting experiment in instant long/short trading has spiraled into stuck funds, frustrated users, and a founder insisting it’s all just a “small beta product.”

The Arena user’s early alarm bells

On August 15, a user who chose to remain anonymous opened a support ticket on the blocmates Discord channel voicing the issue, he wrote:

“Hey guys, might want to look into what's happening over on The Arena. MarginFi seems to be in all sorts of trouble. I've heard on the grapevine that they (MarginFi) were never liquidating positions so now they've got all sorts of massively underwater position stuck on the platform. I've personally got funds I'd deposited on there that have been locked for months.”

Classic DeFi vibes: community locked out of Telegram, users locked out of their own funds.

In an email shared with blocmates, the user explained why he chose The Arena in the first place:

The user touted the higher lending returns compared to competitors like Save Finance, adding that’s why he, and many others used it.

The beta that wasn’t beta

Two days later after the alarm was raised on X and Discord, The user noticed something curious. The Arena’s “Beta” tag that wasn’t on the platform before quietly appeared. Now, suddenly, the project’s line was: this was always a beta, you were just testers. 

The user wasn’t buying it:

The user reiterated in the mail shared:

“The ‘beta’ tag was only applied to The Arena once there was problems”.

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They cited early marketing, posts (see below), and even media coverage made no mention of it being beta. 

They also mentioned that only after withdrawals froze did they start leaning into that framing. Adding that, it’s “part of a pattern of misinformation that plagued The Arena and led to its closure.”

Brennan Claps Back

By August 18, the pressure had reached MarginFi founder Mac Brennan, who fired back on X. In a post aimed at a reporter, he insisted The Arena was a “separate, small beta” with less than 100 daily active users, just two affected pools, and a fix stuck in audit:

“Ask yourself why someone would write on a non-public, un-advertised product with 100 DAUs, which we are fixing, in an industry with exciting, massive events all the time. You won’t find good reasons.”

For Brennan, this was a bug, not a crisis. However, for the users of The Arena platform, the distinction didn’t matter, their money was still frozen.

Looking through the comments of the post, a user (@defi1crypto2) on X pushed back on Mac’s framing, they noted that users like them had funds locked for months with no clear communication and that the “beta” label appeared only recently, not at launch as the team now claims.

Another user (@Dosedone) in the comments criticized Mac’s reaction as defensive and shortsighted. They argued that instead of attacking reporters, Mac should have gone on record to clarify The Arena’s situation, given it was promoted as part of MarginFi with no mention of bugs or beta status.

Meanwhile, Project0, the team behind MarginFi and The Arena, doubled down on Mac’s post in a response to questions from blocmates via mail:

“The Arena has always been positioned as a beta product. We began sunsetting The Arena months ago, asking users to withdraw, and stopped publicly promoting it during that process (....) The program functioned exactly as intended (....) Unlike an AMM, where impermanent loss is accepted, we even went above and beyond to cover user losses during the wind-down.”

Light at the end of the tunnel?

On August 21, the user from blocmates discord ticket gave a cautious update:

“Funds are still stuck. Though MarginFi have been very active in the The Arena TG now (though you still can't actually post in there..) and yesterday wrote a long post about what they're doing re the fix. This has been going on since April, and it was only after a journalist DM'd them (didn't even post on social media, let alone an article) that we saw any real movement, so we'll see, but there does appear light at the end of the tunnel.”

That “light” came in the form of an announcement: affected users would soon be able to verify wallets and withdraw. The Arena even promised refunds at market value, out of pocket if necessary.

But crypto timelines have a way of slipping.

September: delays, discounts, and disillusionment

By September 11, the user’s patience was wearing thin:

“Payouts have been delayed twice already (apparently more users have submitted claims... surprise surprise!) Final deadline is tomorrow but.... now he’s gone and announced yet another project.”

They feared payouts would morph into some token airdrop gimmick, “points boost for a Project 0 token,” instead of real restitution.

Then came the kicker. A screenshot was shared from the user highlighting The Arena’s announcement on Telegram promising withdrawals. The announcement read:

“TLDR, if you're one of the few users experiencing withdrawal bugs, next Wednesday you can start the process of exiting your position and getting your account value back.”

But in practice, users were offered just 10 cents on the dollar.

The Arena user from blocmates discord was livid:

“We’ve all now been offered 10c on the dollar, despite being told publicly… that MarginFi would make depositors whole. Better still, we’re being told… it’s ‘our fault for depositing in LPs’. Nevermind that The Arena was always sold as lending platform.”

They claimed that even liquidators admitted they “didn’t want to” liquidate, leaving bad debt festering. Their conclusion was:

“Despite all the bull*** from MarginFi I get the strong feeling they are close to collapse. If you don’t want to cover such a small amount of bad debt (that you caused) it can only mean one thing: It’s a much larger problem than you’ve admitted AND you’re out of money.”

Meanwhile, in the mail, the user expanded further in direct correspondence:

“Gone were the public indications that this was an isolated situation with minimal capital owed. Now we were being told MarginFi were only going to refund us 10c on the dollar. Why? Because we, as lenders on the platform, had in fact had leveraged positions that had failed to be liquidated.”

They added that they were lending, not borrowing, and their account health said 100% even when they couldn’t withdraw, noting that none of this adds up and deeming it a “runaround.”

Project0 on the other hand sees it differently, in the mail, the team wrote:

“Depositors have received their equity back with the appropriate socialization markdown accounted for.”

They also noted that after liquidity dried up and third-party liquidators stopped participating, they injected their own capital for months to subsidize losses. Project0 added:

“At this point around 20 users remained, who then experienced the normal socialization markdown as expected. As an added safety measure, the protocol temporarily halted withdrawals so that we could ensure everyone withdrew the same socialized amount. We didn’t want, for example, the first user to withdraw a lot and leave nothing left for the remaining users. We’ve been issuing remaining balances manually now, and all users are receiving their equity back.”

Where things stand

As of now, The Arena has disabled positions on the site. 

Additionally, its last X post was August 27. Brennan still calls it a beta. The Arena users still can’t get their complete funds out.

And the gap between those two realities? That’s exactly where the real story is at.

Beyond the headlines: The Arena User vs. Project0 in their own words

The Arena user, in the mail, described how the cracks showed early:

“Early in 2025 we started to see weird stuff with APYs on The Arena. They’d fluctuate massively… then around April we couldn’t withdraw assets at all. The pools gave crazy messages like: USDC liquidity = 15K, APY 1000%, but when you tried to withdraw, it defaulted to a crazy amount, e.g., 1M, and said there wasn’t enough liquidity.” 

The user mentioned that from April, their “funds were locked with no communication at all from the team.”

They added that private chats with the team only made things murkier. In the exchange, Mac Brennan explained that withdrawals were halted to prevent “further socialization” and claimed that liquidators stopped operating because trades became unprofitable due to poor liquidity. 

Brennan said Project0 had even covered losses “out of pocket” and insisted users were being refunded based on “pool health.” The user, however, pushed back, calling the logic inconsistent, questioning why “LPs” needed liquidators at all and accusing the team of shifting narratives instead of honoring full refunds.

The Arena user worries the issues at the platform hints at deeper risks for MarginFi itself:

Project0 pushed back firmly when blocmates put these concerns to them.

While Project0 mentioned that the Telegram channel has always been announcements-only, it is worth noting that the particular Telegram channel on their bio for users to join was once open for members to chat, however sending messages was later disabled this year.

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