Borrower default / seizure
The lender seizes exposure, not property
The contract can move or sell the token while transfers remain open, but the token grants no ownership or security interest in shares or an SPV. Redemption is a contractual request the operator may satisfy through USDC, other value or on-chain liquidity, so enforcement is not self-contained.
Protocol hack custody
Clawback can reverse custody
The permanent delegate and pause authority may allow the issuer to contain a theft or move a stolen balance. No reviewed term makes that assistance automatic, and the same powers can override a protocol's otherwise valid custody or liquidation.
Access or key loss
Technically recoverable, legally discretionary
The permanent delegate can move or burn a stranded balance, but reissue or compensation depends on the operator accepting the request and the claimant's entitlement. The lending contract cannot compel that outcome.