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Hacker drains $8.5 million from Term Finance after taking control of vault governance
Decentralized lending protocol Term Finance lost about $8.5 million after an attack targeting the governance system of its vaults, according to blockchain security firms PeckShield and CertiK.
According to PeckShield, the attacker drained about 2,843 ETH worth $6.87 million, as well as 1.68 million USDC, which was later swapped for roughly 1.68 million DAI. CertiK estimated the total loss at around $8.5 million.
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Before the attack, Term Finance vaults held about $12.45 million. This means the hacker drained roughly 68% of all assets. The Ethereum reserves were almost completely depleted, having stood at about $8.8 million before the incident, according to DefiLlama data.
Term Labs said it had permanently shut down all Term Meta Vaults and revoked their associated DAO governance roles. New deposits into the vaults are no longer possible, although users can still withdraw funds.
According to the company's preliminary findings, the core Term Finance protocol and its direct borrowing and lending markets were not affected. The investigation is still ongoing.
How the hack happened
Onchain monitoring service Defimon said the attacker was able to cheaply acquire a majority of governance tokens, which were held by a relatively small number of holders. The attacker then passed governance proposals that allowed them to take control of Term Finance's vaults.
Term Labs has not yet confirmed exactly how the attacker gained voting control or which governance functions were used.
Term Finance vaults run on Yearn V3 infrastructure. Yearn stressed that the vulnerability was related to a separate governance system built by Term Finance, meaning standard Yearn vaults are not exposed to the same attack vector.
Term Labs has brought in external security specialists and is working to recover the stolen assets. The company also said it would consider ways to cover any remaining shortfall.
This is not the first major incident involving Term Finance. In April 2025, an oracle error triggered unintended liquidations totaling about 918 ETH. The project later recovered around 556 ETH, reducing the final loss to 362 ETH, and reimbursed affected users.
Following that incident, Term Finance pledged to involve third-party experts in reviewing critical updates and to improve governance transparency.
Most common ways crypto projects get hacked
Hackers use several common methods to attack crypto projects. One of the most widespread is exploiting vulnerabilities in smart contracts that allow attackers to bypass protocol rules and drain funds. Criminals also target cross-chain bridges, manipulate price oracles and attempt to seize control of project governance mechanisms, as happened with Term Finance.
Attacks targeting people and company infrastructure are no less dangerous. Hackers steal private keys and login credentials through phishing, malware and social engineering, then use them to access wallets or internal systems. Employees with elevated permissions are a particularly attractive target: compromising just one such account can sometimes allow attackers to bypass even well-secured smart contracts.
As a reminder, Coldcard strengthened its security measures following a $112 million wallet hack.
This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.
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