Balancer Labs Shuts Down After ₱6.93 billion ($116 million) Hack
Balancer Labs is shutting down after a ₱6.93 billion ($116 million) hack in November triggered legal exposure. Founder Fernando Martinelli said the company became a liability to the protocol, while the DeFi protocol itself will continue under Balancer Foundation and DAO management.
Key Takeaway
A $116 million hack forced Balancer Labs to close, but the protocol lives on with zero token emissions.
Balancer Labs founder Fernando Martinelli announced the company's shutdown less than five months after a ₱6.93 billion ($116 million) exploit exposed the DeFi protocol to ongoing legal risks.
The hack hit in November and wiped out liquidity fast. Balancer's total value locked dropped from ₱47.78 billion ($800 million) in October to ₱29.86 billion ($500 million) within two weeks of the exploit, then collapsed further to $158 million. Martinelli said Balancer Labs had become a liability rather than an asset to the protocol due to the real and ongoing legal exposure that made continuing operations untenable.
Balancer Labs CEO Marcus Hardt pointed to broken economics. The protocol was spending too much to attract liquidity relative to the revenue it generated, despite pulling in over $1 million in the past three months. Martinelli said the problem isn't that Balancer doesn't work — the economics around Balancer aren't working.
The protocol itself will continue under a restructured model managed by the Balancer Foundation and Balancer DAO. Martinelli proposed cutting BAL token emissions to zero and restructuring fees so the DAO can capture more revenue. The team size will shrink as much as possible to support a lean continuation path. DAO members are voting on two restructuring proposals to move forward.
The November exploit stemmed from a rounding error in Balancer V2's Composable Stable Pools. Attackers used flash loans to drain WETH, osETH, and wstETH across Ethereum and Gnosis Chain within 15 minutes. White hat hackers recovered around $28 million, StakeWise DAO clawed back roughly $19 million in osETH, and Gnosis Chain froze another $9.4 million through a soft fork. Balancer had passed 11 audits by four security firms before the vulnerability was exploited, with Balancer's peak TVL hitting $3.3 billion in November 2021.
This article was written based on reporting from Cointelegraph.
