Solana’s Loopscale Pauses Lending After $5.8 Million Under-Collateralized Loan Hack
Solana DeFi protocol Loopscale has temporarily halted its lending markets after a $5.8 million exploit, underscoring growing security risks in decentralized finance.
H2 Loopscale Suspends Lending Amid Major Exploit
On April 26, Loopscale co-founder Mary Gooneratne confirmed on X that a hacker had siphoned 5.7 million USDC and 1,200 SOL via a “series of under-collateralized loans.” In response, Loopscale immediately paused all lending functions, though it has since re-enabled loan repayments, top-ups, and loan closures.
“Our team is fully mobilized to investigate, recover funds, and ensure users are protected,” Gooneratne reassured users, while warning that vault withdrawals and other app features remain disabled pending a full security audit.
H3 Details of the $5.8 Million Hack
The exploit targeted Loopscale’s USDC and SOL vaults, representing approximately 12% of the protocol’s $40 million total value locked (TVL). By leveraging under-collateralized positions, the attacker bypassed safety checks—highlighting vulnerabilities in Loopscale’s innovative lending model.
This incident follows a troubling trend: in Q1 2025, crypto losses from hacks topped $1.6 billion, with more than 90% attributed to a $1.5 billion breach at ByBit by the Lazarus Group, according to blockchain security firm PeckShield.
H3 Recovery Efforts and Future Safeguards
Loopscale’s priority now is to recover stolen assets and restore full platform functionality. Gooneratne emphasized that the team is working around the clock to identify the exploit’s root cause and implement mitigation measures to prevent similar attacks.
Industry experts note that rapid incident response and transparent communication are essential to maintaining user trust in DeFi platforms.
H3 Unique Under-Collateralized Lending Model Amplifies Risks
Launched on April 10 after a six-month private beta, Loopscale differentiates itself by matching lenders directly with borrowers rather than pooling deposits—enabling structured credit, receivables financing, and under-collateralized lending on Solana.
While this model can boost capital efficiency—USDC vaults offer 5%+ APR, and SOL vaults yield over 10% APR—it also magnifies risk if collateral checks fail.
With 7,000+ lenders on board, according to researcher OurNetwork, Loopscale’s swift handling of this crisis will be a critical test for its long-term viability.
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