Venus’ XVS token fell more than 9% in the past 24 hours after an exploit left the BNB Chain-based lending protocol facing approximately $2.15 million in bad debt.

The incident, which occurred on March 16, initially had little impact on market prices. However, downside pressure accelerated after analysts observed large holders transferring XVS tokens to exchanges.

The protocol, which manages over $1.4 billion in total value locked, declined alongside a broader downturn in risk assets. The CoinDesk 20 (CD20) index dropped 4.6% خلال the same period.

Venus said the attacker took advantage of thin liquidity in the THE token market, using the asset as collateral to borrow funds and recycle liquidity back into THE. This activity drove the token’s price from roughly $0.26 to nearly $0.56.

The protocol noted that the exploit did not involve flash loans, and confirmed that its oracle systems functioned as intended, with Venus Flux unaffected.

Selling pressure intensified when the attacker offloaded THE, causing the token to drop more than 17% within a day and triggering a wave of liquidations. Estimates suggest the attacker extracted between $3.7 million and $5.8 million prior to those liquidations, including tokenized bitcoin, BNB, and stablecoins.

According to Venus, the impact was largely contained to THE and, to a lesser degree, CAKE markets, with no user funds lost outside the affected pools.

In response, the protocol paused THE-related borrowing and withdrawals, reduced its collateral value to zero, and tightened risk parameters across other potentially vulnerable markets, including BCH, LTC, and AAVE.

The attacker’s address had previously been flagged by community members. However, Venus said it did not act, noting that no rules had been violated at the time.

“Venus is a permissionless protocol, and freezing or blacklisting addresses based solely on suspicion is not appropriate,” the team said, underscoring the trade-offs inherent in decentralized finance.

A governance proposal is expected to determine how the protocol will cover the losses, likely through its risk fund.