XVS slides 9% after exploit hits Venus protocol, creating bad debt.

Venus’ XVS token dropped over 9% in the past 24 hours after an exploit left the BNB Chain-based lending protocol with roughly $2.15 million in bad debt.

Although the exploit occurred on March 16, the market reaction was delayed. Selling pressure picked up after on-chain data showed large holders moving significant amounts of XVS to exchanges.

The protocol, which has more than $1.4 billion in total value locked, declined amid a broader pullback in risk assets, with the CoinDesk 20 (CD20) index falling 4.6% خلال the same timeframe.

Venus said the attacker capitalized on low liquidity in the THE token market, accumulating the token and using it as collateral to borrow other assets. The borrowed funds were then used to purchase more THE, pushing its price from around $0.26 to nearly $0.56.

The protocol clarified that the exploit did not rely on flash loans, while its oracle infrastructure continued to function normally. Venus Flux was also not impacted.

The situation reversed when the attacker began selling THE, sending the token down more than 17% in under 24 hours and triggering liquidations. Estimates indicate that between $3.7 million and $5.8 million was extracted before the liquidations occurred, including tokenized bitcoin, BNB, and stablecoins.

Venus noted that the damage was largely confined to THE markets and, to a lesser extent, CAKE, with no user funds affected outside those pools.

In response, the protocol suspended borrowing and withdrawals for THE, reduced its collateral factor to zero, and tightened risk parameters across other markets considered vulnerable, including BCH, LTC, and AAVE.

The attacker’s address had previously been flagged by the community, but Venus said no action was taken at the time as no rules had been breached.

“Venus operates as a permissionless protocol, meaning we cannot freeze or blacklist addresses based solely on suspicion,” the team said, highlighting a key trade-off in decentralized finance.

A governance vote is expected to determine how the protocol will address the losses, likely through its risk reserve fund.

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