Borrower default / seizure
On-chain seizure works; redemption is gated
The protocol can transfer or sell the balance after default while transfers are open. A lender seeking cash redemption must satisfy the issuer's KYC/AML process, so autonomous liquidation depends on secondary-market depth rather than an unconditional redemption rail.
Protocol hack custody
The issuer can stop, but not directly reverse
The pause and freeze authorities can immobilise affected accounts and halt transfers. No permanent delegate is present, so the observed mint controls do not themselves let the issuer extract a stolen balance; cancellation or reissue would require a separate legal and operational process.
Access or key loss
Freezing does not unlock a stranded account
The issuer can freeze the inaccessible account but cannot transfer from it with the observed extensions. Recovery would require an evidenced cancellation/reissue process outside the escrow contract, and none is treated here as automatic.