A Venus Protocol User Exploited Through Social Engineering for $27M

A user of Venus Protocol—a major decentralized lending platform on the BNB Chain—lost approximately $27 million in cryptocurrency assets due to a phishing attack.

Initial reports from blockchain security firms like PeckShield and Cyvers Alerts flagged suspicious transactions, sparking fears of a protocol-level exploit. However, investigations quickly clarified that this was not a vulnerability in Venus’s smart contracts but rather a case of social engineering, where the victim approved a malicious transaction granting the attacker unlimited access to their wallet.

The stolen funds, held in Venus-wrapped tokens such as vUSDT, vUSDC, vETH, vXRP, and BTCB, remain in the attacker’s contract address and have not been swapped or laundered as of the latest updates.

Venus Protocol, which manages around $2.7 billion in total value locked (TVL) and peaked at over $7 billion in assets, immediately paused its operations to investigate and assist the victim. The platform emphasized that its core contracts and frontend were secure, and the pause was a precautionary measure to prevent the attacker from withdrawing the funds while recovery efforts continue.

An emergency community vote was proposed to force-liquidate the attacker’s position, though normal users are temporarily unable to manage loans or deposits during the pause. The victim was tricked into signing a transaction via a phishing link, likely disguised as a legitimate interaction (e.g., a fake airdrop or urgent update).

This granted token approvals to the attacker’s address, allowing instant drainage of assets from the user’s Venus positions. Breakdown of stolen assets: ~$19.8 million in vUSDT (Venus-wrapped USDT). ~$7.15 million in vUSDC (Venus-wrapped USDC), ~$146,000 in vXRP (Venus-wrapped XRP), ~$22,000 in vETH (Venus-wrapped ETH), 285 BTCB (wrapped Bitcoin on BNB Chain), valued at around $30,000 at the time.

Early alerts suggested a possible smart contract compromise, such as an update to the Core Pool Comptroller contract pointing to a malicious address, which could have drained protocol funds like vUSDC and vETH. PeckShield initially estimated $27 million but later revised it to $13.5 million after accounting for the user’s outstanding debt position.

However, Venus and security experts like Ignas and Cyvers confirmed it was user-side error, not a protocol flaw. The team stated they are in direct contact with the victim and committed to recovery, even if it means keeping the protocol paused longer.

Liquidations for other users are halted to avoid cascading effects. Venus reiterated: “Venus was not exploited, but we are committed to protecting our users. If the protocol resumes now, the hacker gets the user’s funds.” The DeFi community on X erupted with discussions, blending sympathy for the victim, warnings about phishing risks, and criticism of DeFi’s reliance on user vigilance.

Analysts like Crypto Jargon highlighted that “one bad approval and boom, you’re done,” urging users to revoke approvals regularly using tools like Revoke.cash and to use hardware wallets for added security. Posts noted this as part of a wave of incidents, including a $8.4 million exploit on Bunni (a Uniswap v4-based DEX) and a $2.3 million phishing attack on World Liberty Financial (WLFI) token holders the same day.

Some blamed EVM-compatible chains for enabling unlimited approvals, calling it a “cancer to web3.” A few users speculated about deeper issues, like obfuscated dApp code enabling targeted drainers or even suggesting the system is “rigged.”

Security researcher Juliano Rizzo pointed out how frontends loading suspicious code fingerprints wallets, facilitating attacks. Venus’s native token, XVS, dropped over 6% in the hours following the news, reflecting broader concerns about BNB Chain DeFi security. However, stablecoins like USDC remained stable at $1.00.

Attackers pumped the XVS token price on Binance, used it as collateral to borrow ~4,200 BTC ($168 million at the time), then let it crash, leaving $100 million in bad debt. Theories even suggested team involvement due to fund trails to Binance hot wallets. A wallet linked to the $600 million BNB exploit had $63 million liquidated on Venus after using stolen BNB as collateral.

Despite these, protocol exploits have declined industry-wide since 2021-2022, with phishing now the top vector—responsible for over $1 billion in losses in 2024 alone. This incident underscores that while smart contracts are hardening, human error remains DeFi’s Achilles’ heel.

Phishing thrives in bull markets when wallets are fuller and users less cautious. To protect yourself: Always manually type URLs or use bookmarks; avoid clicking unsolicited messages. Before signing, check for unlimited token access. Revoke old ones via Revoke.cash or Etherscan.

Hardware wallets (e.g., Ledger) require physical confirmation, blocking remote drains. Monitor wallets with tools like De.Fi or Cyvers for suspicious activity. Be wary of dApps with obfuscated code or wallet fingerprinting. Recovery odds are low—stolen funds often end up in mixers—but Venus’s pause buys time for negotiation or bounties.