Balancer Labs Winds Down Months After $128M DeFi Exploit

Balancer Labs has decided to call it quits six months after its namesake protocol suffered a major security breach that founders say caused reputational damage and triggered a sell-off in the Balancer token.

The protocol, created to build and manage a DeFi platform for token swaps and liquidity pools, was hit by an exploit in November last year, after an attacker drained $128 million across six blockchains in just 30 minutes from Balancer V2’s Vault contract.

The “exploit created real and ongoing legal exposure,” co-founder Fernando Martinelli wrote in a statement on Monday,  adding that Balancer Labs was left without “any sources of revenue.” 

“Maintaining a corporate entity that carries the liability of past security incidents, while the protocol itself needs to move forward unburdened, is not responsible stewardship,” Martinelli added.

Balancer no longer needs a traditional company above it, and its DAO, Foundation, and service-provider structure should carry the protocol forward, with key staff set to move into a new operating arm if governance approves, he added.

The hack worked by exploiting a small pricing error in Balancer’s older V2 stable pools, where the system inconsistently rounded numbers during swap calculations, according to an analysis by blockchain security firm BlockSec.

“Beyond the immediate financial impact, the incident led to three lasting pressures: unrecovered funds, ongoing legal and operational exposure, and a significant erosion of user trust,” Brian Wong, senior audit engineer at BlockSec, told Decrypt. 

Transitioning to a DAO governance model could help “isolate legal risk, reduce fixed operational overhead, and shift governance and accountability more directly to the community,” Wong added.

“I believe Balancer still has a chance to turn things around and prove to token holders who stay that there can be product market fit and sustainability,” Martinelli said.

Balancing act

The wind-down points to both the longer-running weaknesses in Balancer’s token and governance model and the pressure the November hack put on the protocol’s ability to sustain itself, observers told Decrypt.

Balancer’s decision “exposes structural failure” that points to how it has “capitulated to a broken model where emissions faded, governance weakened, value capture stayed shallow,” Dominick John, analyst at Zeus Research, told Decrypt.

While streamlining its operations could be the right call, it comes as a “late-stage patch,” he said, adding that older DeFi models built around token rewards and incentive-driven growth are being “phased out.”

The shutdown also appears to be Balancer’s way of finding “a quick way to escape legal risks” after the November 2025 hack,” Ryan Yoon, senior analyst at Tiger Research, told Decrypt.

It gives Balancer a way to use the DAO transition to drop veBAL, its escrow governance model, which Yoon suggested had become part of the protocol’s broader structural problems.

The next test is whether Balancer’s smaller team can “actually fix governance,” Yoon said, by keeping governance aligned, security intact, and the treasury stable enough to carry the protocol forward, areas John said are “critical to keeping Balancer relevant.”