Term Finance, a decentralized lending protocol, lost an estimated $8.5 million after an attacker gained governance control of its vault contracts and drained assets.

Term Labs announced that it has permanently disabled all Term Meta Vaults and revoked their DAO governance roles, halting new deposits while allowing withdrawals.

The company said its underlying protocol and borrowing and lending markets remain intact, though verification of the full impact continues.

On‑chain monitoring service Defimon reported that the attacker acquired a majority of the sparsely held governance token and submitted proposals that transferred control of the vaults.

Term has not confirmed how voting control was achieved or which governance functions were used.

The vault contracts use Yearn V3 infrastructure, and Yearn said the attack involved a custom governance wrapper that does not affect standard Yearn vaults.

The incident follows an April 2025 oracle error that triggered unintended liquidations, which Term mitigated by recovering assets and reimbursing users.

After the incident, Term pledged third‑party validation for critical updates and greater governance transparency.

Term said it is coordinating with external security teams to pursue asset recovery and explore remedies for any remaining shortfall.