Web3 is Going Just Great

The project later described the exploit as "a novel attack involving durable nonces, resulting in a rapid takeover of Drift's Security Council administrative powers." Once the attacker had access to admin capabilities, they quickly eliminated risk management limits on the protocol and drained huge quantities of tokens, which they swapped to USDC and then ETH.

Some have criticized USDC's issuer, Circle, for not freezing the stolen funds during the six hours they were held in USDC. Unlike ETH, USDC is controlled by a centralized company that can, and regularly does, freeze assets determined to have been stolen or connected to illicit activity.

The theft is among the largest in defi history.

Ultimately, facing being outvoted, the attacker dumped their MFAM holdings and the proposal was canceled as their balance had fallen below the proposal threshold.

This was only the most recent of Moonwell's troubles after the protocol suffered a $1.78 million loss in February due to an oracle misconfiguration and a $3.7 million loss in November 2025.

Balancer co-founder Fernando Martinelli has said he strongly considered shutting down the protocol entirely, but ultimately decided to continue the project as it generates a relatively small amount of revenue. Instead, the project will move to being operated by a DAO and operating company, which Martinelli hopes will allow them to dodge "real and ongoing legal exposure" and "the liability of past security incidents".

Although another Balancer co-founder has optimistically presented this as "the start of a better chapter" for Balancer, it remains to be seen whether a skeleton crew will be able to revive the project.

An exploiter took advantage of a flaw in USR's minting code to create tens of millions of USR tokens without depositing any assets to back them. The attacker then sold the unbacked USR, crashing the stablecoin's price to as low as $0.14. The attacker has profited at least 11,400 ETH (~$24 million), though they are still selling.

Some defi protocols paused USR-exposed strategies to avoid downstream impacts. Resolv issued a statement that the token's collateral pool was unaffected, though this is likely little comfort for those who purchased the unbacked USR.

While the exploit left the Venus Protocol with over $2 million in bad debt, it's not clear if the attacker even made money from the exploit. The exploiter's position was ultimately liquidated, collapsing the increase in THE price. However, it's possible the exploiter took advantage of the price discrepancy elsewhere to profit.

The Venus Protocol has had a number of issues in the past — notably in June 2023, when the team developing the BNB Chain had to intervene when the a thief borrowed $150 million on Venus against stolen tokens and then faced liquidation.

BlockFills was backed by investors including Susquehanna and CME Ventures.

The Aave founder offered to refund the user the $600,000 in fees collected from the transaction, and acknowledged "there are additional guardrails the industry can build to better protect users".

Chaos Labs, presumably embarrassed to have lived up to its name, promised to reimburse users whose positions were improperly liquidated.

According to Gondi, the exploiter took advantage of functionality that allowed users to sell their NFTs to automatically repay loans.

Gondi has said it has reimbursed customers by buying them "comparable items" from the same collections as their stolen NFTs, although it seems questionable that this will satisfy customers who purchased products whose whole selling point is that they aren't interchangeable.

The blunder was likely due to the authorities' lack of knowledge about cryptocurrency. The move was somewhat akin to authorities publicly posting a username and password for a criminal's bank account — though that would likely be an easier mistake to unwind.

According to Step Finance, "we explored every possible path forward, including financing and acquisition opportunities. Unfortunately, we were unable to secure a viable outcome and have made the difficult decision to end all operations effective immediately."

In reply to Step Finance's announcement, crypto investor Mike Dudas claimed that the project had contacted him about bridge financing, but that Step had never responded to his request for more information about the hack. "i responded: 'would need to see the security post mortem before i could consider investing here' <crickets>"

The attacker was able to manipulate the oracle price to show that USTRY was priced at $100 (rather than its actual trading price of around $1.05). Then, they borrowed against the overvalued asset, withdrawing XLM and USDC priced at $10.2 million. However, around 48 million of the stolen XLM (~$7.2 million) were frozen.

Blockchain security researcher Specter has suggested there may be links between this attack and a $50 million theft from the Infini "stablecoin neobank" a year ago.

On February 19, the office announced they had recovered the stolen assets and identified the thief.

This is the second time Moonwell has suffered a loss thanks to an oracle misconfiguration. In November 2025, the platform was left with almost $3.7 million in bad debt after a different asset was mispriced.

Although the vulnerable pull requests were at least partially developed by an AI tool, the security auditor who initially attributed the vulnerability to Claude Opus 4.6 later softened his criticism, noting that even senior developers could have made the same mistake. He did, however, criticize the project for a lack of sufficiently rigorous testing that should have caught the issue.

Platforms limiting or halting withdrawals — particularly lending platforms — is reminiscient of the 2022 crypto crash, when falling crypto prices exposed crypto firms that had been engaging in highly risky or sometimes illegal behavior. As crypto prices fell, firms were unable to meet their loan obligations or faced margin calls, and the tightly interconnected web of lending within the crypto ecosystem often meant that one company failure cascaded into multiple more. It remains to be seen whether this is an isolated incident or the beginning of a trend as crypto prices hit revisit price lows not seen in over a year.

BlockFills claims to have more than 2,000 institutional clients globally, and boasted of facilitating more than $61 billion in transactions in 2025. The company's backers include Susquehanna Capital and CME Ventures.

The exchange announced that they had recovered 99.7% of the erroneously awarded tokens, leaving around 1,860 BTC (~$130 million) unaccounted for.

The incident has drawn further scrutiny from Korean regulators, who said that the error "has exposed the vulnerabilities and risks of virtual assets." Regulatory agencies in the country had already been cracking down on crypto firms following a $30 million hack of the Upbit crypto exchange in November 2025.

As many companies do these days, the Winklevosses tried to pin the layoffs on AI, claiming that the engineers using AI are ten times more productive. "A smaller organization, leveraging the right tools, isn't just more efficient, it's actually faster," they wrote — in a blog post that itself reeks of AI.