Security authorities on the blockchain said that the decentralized lending protocol Term Finance incurred an estimated loss of $8.5 million after an attacker gained control of the governance of its strategic treasury vaults.
According to published estimates, the attacker withdrew around 2,843 ETH worth $6.87 million at the time, along with $1.68 million USDC, which was converted into roughly 1.68 million DAI. CertiK also estimated the total loss at about $8.5 million.
DefiLlama data indicates that the loss accounted for around 68% of the total $12.45 million that was held in Term’s vault product before the attack, including the near-total removal of Ethereum deposits worth roughly $8.8 million.
Final shutdown of Meta Vaults
Term Labs said it permanently and irreversibly closed all its Meta Vaults, and also revoked the DAO governance roles to prevent any new deposits, while keeping withdrawals open for users.
The company added that its initial investigation found that the core Term protocol or its direct lending and borrowing markets were not affected, but it is still working to determine the full scope of the incident.
How did the exploit happen?
A monitoring service, Defimon, reported that the attacker obtained, at low cost, most of a governance token that was distributed in a limited way, then passed proposals that allowed it to take control of Term’s vaults. Term has not yet confirmed the exact method by which the attacker gained voting power or specifically what governance functions were used.
The vault contracts use Yearn V3 infrastructure; however, Yearn said the attack was linked to a custom governance wrapper, and the exploitation path does not apply to standard Yearn setups.
Response steps and lessons for users
Term said it is working with external security teams to recover assets and address the impact, and it will look for ways to deal with any remaining shortfall. This comes after a previous incident in April 2025 related to an oracle error that led to unintended liquidations of about 918 ETH, before Term recovered roughly 556 ETH and reduced its final loss to 362 ETH while compensating affected users.
This incident highlights that DeFi risks are not limited to smart contracts alone; they also extend to governance design, the distribution of governance tokens, and vault control mechanisms. For users, risk diversification, reviewing governance permissions, and understanding whether assets are deposited in upgradable or closed vaults remain key elements before depositing.
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