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Term Finance vaults drained in governance exploit tied to $8.5M loss

Blockchain security firms estimated the attacker withdrew about 2,843 ETH and about 1.68 million USDC from the protocol's vaults.

Reported · Written up by our desk · DeFi

DeFi lending protocol Term Finance said its Ethereum-based Term vaults were affected by a governance exploit that resulted in an estimated $8.5 million loss, according to blockchain security firms PeckShield and CertiK, citing on-chain activity reported by the firms.

The Block reports the protocol’s fixed-rate lending vaults were drained on Sunday after an unknown attacker used Term’s governance system to move ether and stablecoins. PeckShield estimated the withdrawals at about 2,843 ETH, roughly $6.9 million, and 1.68 million USDC, which the firm said was later swapped for about 1.68 million DAI.

Term Labs acknowledged the issue, saying it was aware of the governance exploit impacting Term vaults, and it said it would share more detail after investigating. The protocol did not confirm the total scale of losses or name which specific vaults were hit.

The Block also notes that Term’s Strategy Vaults are ERC-4626 tokenized vaults built on Yearn V3 infrastructure. Yearn said the exploit route relied on a custom governance wrapper around the vaults, and it added that standard Yearn vaults were unaffected, while Term Finance’s reported losses appeared linked to a single address that first received 2 ETH from Tornado Cash, according to PeckShield.

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