Term Labs Loses $8.5M as Governance Exploit Drains Ethereum Vaults

Term Labs has lost an estimated $8.5 million after an attacker gained enough governance power to execute malicious proposals against vaults operated by the Ethereum-based fixed-rate lending protocol.

Term Labs confirmed the governance exploit on Sunday and began investigating the affected vaults. The attacker-controlled address now holds approximately 2,843 ETH and 1.6 million DAI, placing the observed proceeds near $8.5 million at current prices.

Wallets connected to the operation were funded through Tornado Cash before the attacker accumulated governance voting power. The attack then used Term’s voting process to authorize transactions against protocol vaults, turning control of governance into control over deposited assets rather than exploiting Ethereum itself.

Attacker Used Governance to Reach Term Vault Assets

TERM is the governance token for Term Finance, with token holders able to participate in decisions affecting the protocol. Term operates fixed-rate lending markets and vault products that deploy capital across onchain lending strategies.

The attack targeted the governance path controlling Term vaults. The attacker accumulated voting power, submitted proposals capable of moving vault assets and secured enough support for the transactions to execute.