Crypto Platform Unleash Protocol Suffers $3.9M Exploit

Unleash Protocol, a decentralized platform for intellectual property management and money markets built on Story Protocol, recently experienced a major security breach. An attacker compromised the project’s multisig governance system, resulting in the theft of approximately $3.9 million in user funds.

The incident marks an unfortunate conclusion to the project’s 2025 activities and highlights the ongoing risks associated with DeFi multisig implementations. As a result, the team has decided to pause operations while an investigation is conducted.

Attacker Steals $3.9 Million

The breach occurred when an external address gained control over Unleash Protocol’s multisig governance system. This unauthorized access enabled them to modify the smart contracts without proper approval and to withdraw pooled assets directly. Initial on-chain tracking reveals large transfers, including over 766,235 WIP tokens valued at approximately $1.15 million. 

The attacker transferred the stolen funds to Ethereum via services such as Stargate, receiving approximately 1,337.1 ETH in return. According to the blockchain security firm PeckShield, the total loss amounts to around $3.9 million based on current market prices. The attacker then sent the loot to Tornado Cash in increments of 0.1 ETH, 1 ETH, 10 ETH, and 100 ETH, a strategy that helped obscure the funds’ final destination.

The project’s team, however, has assured that the underlying Story Protocol infrastructure remains uncompromised. Analysts note similarities to previous DeFi incidents involving upgradable contracts, with the root cause appearing to be related to loopholes in key management or potential social engineering. 

Team Response and Industry Implications

Upon detecting unauthorized activity, Unleash Protocol paused all contract interactions. The team acknowledged the incident’s seriousness and is working with security experts and forensic teams for a thorough investigation. Users are advised, however, to refrain from interacting with Unleash contracts until further announcements are made. 

Meanwhile, the year has seen a significant increase in fraudulent activities in the crypto space. SlowMist’s 2025 Blockchain Security and Anti-Money Laundering (AML) Annual Report, released on December 30, reveals that while security incidents decreased from 410 in 2024 to 200 in 2025, total losses surged to $2.935 billion.

Centralized exchanges were the most heavily impacted, suffering damages totaling $1.809 billion, with a single breach at Bybit accounting for approximately $1.46 billion of that loss. Smart contract vulnerabilities and account compromises were the leading attack methods, with sophisticated AI-based phishing techniques. 

Drainer attacks impacted over 106,000 victims, resulting in losses of $83.85 million. Regulators intensified their AML efforts, recovering or freezing $387 million, with SlowMist contributing $19.29 million. The metrics emphasize the importance of compliance in the Web3 space.

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