Term Finance shuts Meta Vaults after $8.5M attack

Term Finance announced the permanent shutdown of all Meta Vaults and the revocation of associated DAO governance roles following a large-scale exploit that removed roughly $8.5 million in assets.

Immediate actions

New deposits to Meta Vaults are blocked indefinitely, while existing users can still submit withdrawal requests. The protocol has not disclosed the remaining balance in the vaults or the amount each depositor may recover.

Scale of the loss

Security firm PeckShield traced the theft to approximately 2,843 ETH (about $6.87 million at the time) and 1.68 million USDC. The USDC was swapped for a similar amount of DAI after leaving the protocol. The attacker’s wallet was initially funded with 2 ETH routed through Tornado Cash.

How the exploit occurred

The attack targeted a custom governance wrapper built around Yearn V3‑based vault contracts, not the standard Yearn vaults themselves. By acquiring roughly $951 worth of governance tokens, the attacker gained enough voting power to approve proposals that moved funds from four USDC strategy vaults and about 91 % of the Ethereum Meta Vault.

Impact on related protocols

Yearn confirmed that its regular V3 vaults were unaffected, as the exploit leveraged Term Finance’s bespoke governance layer. Term Finance also stated that its core lending and borrowing markets remain intact.

Recovery and next steps

Term Labs said it will explore pathways to cover any shortfall but provided no timeline, compensation plan, or details on coordination with law enforcement, exchanges, or stablecoin issuers. External security specialists are assisting with remediation, though specific firms have not been named.

Broader context

Governance‑based attacks have risen in 2026, prompting projects like ENS DAO to implement security councils and multi‑signature veto mechanisms. Regulatory commentary notes that U.S. authorities assess each DAO on a case‑by‑case basis, but no formal investigation into Term Finance has been announced.