Ethereum-based fixed-rate lending market Term Finance's vaults were drained of about $8.5 million on Sunday after an unknown attacker exploited the protocol's governance system to move ether and stablecoins, according to blockchain security firms PeckShield and CertiK.
"We are aware of a governance exploit impacting Term vaults," Term Labs said on X. The team said it would provide more detail after investigating. Term did not confirm the scale of the losses or identify the affected vaults.
PeckShield estimated that the attacker withdrew about 2,843 ETH worth roughly $6.9 million and 1.68 million USDC. The USDC was swapped for about 1.68 million DAI, the firm said on X. PeckShield traced the funds to a single address which had initially received 2 ETH from mixing protocol Tornado Cash. CertiK separately put the loss at roughly $8.5 million.
Governance protections did not prevent exploit
Term's Strategy Vaults are ERC-4626 tokenized vaults built on Yearn V3 infrastructure. The vaults allocate capital between Term's fixed-rate lending markets and variable-rate lending protocols, according to Term's developer documentation.
