TLDR
- Term Finance lost an estimated $8.5 million after an attacker exploited governance control over its strategy vaults.
- The attacker reportedly drained 2,843 ETH and about $1.68 million in stablecoins from the affected vaults.
- The losses represented roughly 68% of the $12.45 million held in Term Finance’s vault product before the attack.
- The attacker allegedly gained majority governance control and used malicious proposals to authorize vault withdrawals.
- Term Labs permanently closed new Meta Vault deposits and revoked DAO governance roles after confirming the exploit.
Decentralized lending protocol Term Finance suffered an $8.5 million loss after an attacker gained control of governance tied to its strategy vaults. The Term Finance hack affected the Meta Vault product, while the company said its borrowing and lending markets remained operational.
Security firms PeckShield and CertiK tracked the attacker’s holdings. PeckShield reported 2,843 Ether worth $6.87 million and 1.68 million USDC. The attacker exchanged the USDC for 1.68 million DAI.
PeckShieldAlert: X
Term Finance Hack Targets Vault Governance
Term Labs confirmed on August 23, 2026, that a governance exploit had affected Term Vaults. The company said the attack focused on the vault layer built above its fixed-rate lending protocol. Its review had not found damage to the core lending markets.
Onchain monitor Defimon said the attacker bought a majority share of a lightly held governance token. Reports said the attacker used 2 ETH traced to Tornado Cash to acquire TERM tokens. That voting power allegedly allowed malicious proposals to pass.
The proposals reportedly gave the attacker control over withdrawals from strategy vaults. Reports said the method bypassed a seven-day timelock and an LP veto process through custom governance logic. Term Labs has not confirmed the path.
The affected vaults use Yearn V3 infrastructure. Yearn said the attack involved a custom governance wrapper used by Term Finance. It added that the same attack path does not apply to standard Yearn vault deployments.
Term Labs Permanently Closes Meta Vault Deposits
Term Labs permanently stopped new deposits into all Meta Vaults after confirming the incident. It revoked DAO governance roles linked to the vaults. Withdrawals remain open for users while the company continues its review.
Update: All Term Meta Vaults were shut down and dao governance roles have been revoked. This shutdown is irreversible and permanently prevents further deposits. Withdrawals remain open.
Today's incident involved Term Vault governance. Based on our investigation so far, the… https://t.co/e1jstHfzWd
— Term Labs (@term_labs) August 23, 2026
DefiLlama data showed the vault product held about $12.45 million before the attack. The reported loss represented 68% of those assets. The vaults also held nearly $8.8 million in Ether before the attacker drained most deposits.
Recovery Review Continues After Previous Oracle Loss
Term Labs said it is working with outside security teams on recovery and remediation. The company advised users to revoke contract approvals temporarily and rely only on official updates while the investigation continues.
The incident follows an April 2025 oracle error that caused about 918 ETH in unintended liquidations. Term later recovered about 556 ETH, recorded a final loss of 362 ETH, and reimbursed affected users.
