Term Finance has permanently shut down its Meta Vaults product following an exploit estimated at $8.5 million by blockchain security firm PeckShield. While withdrawals remain open as of the August 23 update, Term Finance has not disclosed remaining vault assets or provided a concrete plan to cover any shortfall, leaving depositors in uncertainty about recovery amounts.
For Armada's crypto repo desk, this incident underscores the counterparty and collateral risks associated with DeFi-native lending infrastructure. If any Armada clients or counterparties have exposure to Term Finance or similar protocol vaults, the unquantified shortfall represents a credit event that could affect their balance sheet and collateral availability. It also reinforces Armada's no-rehypothecation policy and the importance of vetting counterparty DeFi exposure during onboarding.