Decentralized lending protocol Term Finance lost an estimated $8.5 million after an attacker exploited governance control of its strategy vaults, according to blockchain security firms.
On Sunday, security firm PeckShield reported that the attacker drained approximately 2,843 Ether (ETH), valued at $6.87 million at the time, alongside 1.68 million USDC which was exchanged for about 1.68 million Dai (DAI). CertiK published a similar estimate, placing the total losses at approximately $8.5 million.
Data from Defillama indicated that the reported losses accounted for roughly 68% of the $12.45 million held in Term's vault product prior to the attack, which included nearly all of its approximately $8.8 million in Ethereum deposits.
In response to the incident, Term Labs stated it had irreversibly shut down all Term Meta Vaults and revoked their decentralized autonomous organization (DAO) governance roles. This action permanently prevents additional deposits while keeping user withdrawals open. The company reported that its underlying protocol and direct borrowing and lending markets remained unaffected based on preliminary investigations, though the full scope was still being verified.
Governance Mechanism and Infrastructure
Onchain monitoring service Defimon reported that the attacker inexpensively acquired a majority of a sparsely held governance token, allowing them to pass proposals that seized control of the vaults. Term has not yet confirmed the method used to obtain voting control or which governance functions were leveraged in the attack.
The affected vault contracts utilized Yearn V3 infrastructure. However, Yearn clarified that the exploit involved a custom governance wrapper and that the attack vector does not affect standard Yearn vault configurations.
Term stated it is collaborating with external security teams on asset recovery and remediation, and will explore paths to address any remaining financial shortfall.
Previous Incidents
This security event follows an oracle error in April 2025 that caused approximately 918 ETH in unintended liquidations. During that prior incident, Term recovered about 556 ETH, brought its final net loss down to 362 ETH, and reimbursed affected users. Following that postmortem, the protocol had pledged to implement third-party validation for critical updates and increase governance transparency.
