Venus Tightens Collateral Rules After $3.7 Million Exploit Involving THENA’s THE Token

Venus Protocol, the largest lending platform on BNB Chain, has frozen collateral on six additional markets after an attacker exploited THENA’s low-liquidity THE token to drain an estimated $3.7 million in digital assets.

Security researchers identified the attacker’s address as 0x1a35…6231, which received 7,400 ETH from crypto mixer Tornado Cash before executing the attack.

Six Markets Frozen as Venus Hunts for Concentration Risk

The attacker built a large position in THE, inflating its price from roughly $0.27 to nearly $5 according to on-chain researcher Weilin Li.

That inflated collateral was used to borrow approximately 20 BTCB, 1.5 million CAKE, and 200 BNB before liquidation triggered a price collapse back to $0.24.

To bypass Venus’s supply cap, the attacker transferred THE tokens directly to the vTHE contract rather than depositing through standard minting. The technique is a known vulnerability in Compound-forked lending platforms.

THENA said its security systems flagged the incident around 12 PM UTC and confirmed its smart contracts were not breached.

Venus confirmed “unusual activity” in the THE and CAKE markets.

In response, Venus reduced collateral factors to zero on Bitcoin Cash (BCH), Litecoin (LTC), Uniswap (UNI), Aave (AAVE), Filecoin (FIL), and Trust Wallet Token (TWT).

The freeze targets markets with capitalization below $2 billion, daily volume under $100 million, DEX TVL below $40 million, and single-user collateral concentration above 60%.

Venus has accumulated bad debt from exploits since 2021, including $95 million from XVS price manipulation and $14 million from the Terra/LUNA collapse. Its TVL has fallen from a peak of $7 billion to approximately $1.47 billion.