rewrite this title Rugpulls, MEV and Smart Contract Carnage: What Actually Got Rekt in 2025

2025 was a harsh year for DeFi. Hacks, rugpulls, and miner/validator exploits via MEV led to an estimated US$3.4 billion in losses, wiping out funds and shaking user and investor confidence.

As platforms chased new yield strategies with complex smart contracts, cross-chain bridges, and experimental tokenomics, the attack surface grew. Code flaws, poorly managed liquidity, and misaligned incentives became costly weak points.

Builders, investors, and users who want a more sustainable DeFi ecosystem must study the recurring vulnerabilities and exploit patterns—and take the necessary action to prevent unfortunate losses.

The Rugpull Wave

This year reminded everyone that despite the crypto industry becoming more mature, scams and exploits remain a serious threat. According to DappRadar, the total value lost to hacks in 2025 jumped to about $6.3 billion (as at Q2), up sharply from roughly US$90 million lost during the same period in 2024.

Mantra Network (Polygon chain)

Mantra delivered the most devastating loss of the year, responsible for about 92% of all DeFi losses, totalling roughly US$5.5 billion. Wallets linked to the project drained liquidity pools, liquidated user assets, and left holders stuck with worthless tokens. 

On-chain data showed almost no active wallets leading up to the collapse, followed by a sharp spike in transfers to exchanges, a textbook sign of an exit scam. Mantra now stands as one of the largest DeFi scams ever recorded.

Abracadabra

Abracadabra suffered a flash-loan exploit, resulting in around $1.8 million in losses. The attacker used a short-term, high-volume loan to manipulate the protocol’s smart contracts and siphon out funds.

Although much smaller than the Mantra incident, it highlighted how even established platforms can be compromised within seconds if their contract logic isn’t airtight.

HyperVault

HyperVault, a yield-farming platform, reportedly withdrew about $3.6 million in user deposits before disappearing entirely. The incident underscored the dangers of newer or lightly audited DeFi projects, where governance, transparency, and incentives may not align with long-term user safety.

RELATED: The Biggest Hacks and Exploits in DeFi History and What We Can Learn From Them

MEV (Miner/Maximal Extractable Value) Exploits

MEV attacks, especially sandwich attacks, front-running, and liquidation snipes, spiked across major decentralized exchanges this year. For example, a trader swapping about $220,764 in stablecoins on Uniswap v3. A malicious bot front-ran and back-ran the transaction, leaving the trader with only $5,271. More than $215,000 was lost in just a few seconds.

Data from the analytics team studying these attacks showed how widespread the problem became. In March 2025 alone, over 33,000 users were hit by sandwich attacks, and only 101 entities (mostly bots and MEV searchers) were responsible for the majority of them.

Although DEXs and AMM platforms suffered the most, the issue wasn’t limited to trading. Lending protocols, stablecoin swap pools, and cross-chain bridges also experienced growing MEV exploitation. Attackers used techniques like transaction-ordering manipulation, liquidity distortion, and oracle weaknesses to extract value, almost always at the expense of everyday users.

Systemic impacts

The wave of MEV exploitation sent shockwaves through the entire DeFi ecosystem. Ethereum and other EVM-compatible networks saw repeated gas-price spikes and occasional congestion as bots competed to front-run, reorder, and extract value from transactions. This not only drove up fees for everyday users but also drained liquidity from popular pools in a measurable way.

For users still learning how DeFi works, the damage went beyond lost money. Trust in smart-contract safety and DEX fairness took a hit. Wallets emptied by bots, unexpected slippage, and rug-pull-like behavior made both liquidity providers and small traders more cautious. As confidence dropped, some capital moved out of high-yield pools and risky protocols, reducing overall liquidity and slowing down growth in several DeFi sectors.

Mitigation approaches

As MEV exploitation grew throughout 2025, the industry responded with a mix of technical upgrades and new protocol designs. Flashbots, a long-standing leader in Ethereum’s block-building ecosystem, saw a major resurgence. Its “Protect” RPC lets users send transactions privately to block builders instead of the public mempool, shielding them from sandwich attacks, front-running, and other MEV tactics.

Other projects started testing fair-ordering and MEV-smoothing tools. Some DEXs and wallets rolled out batch-transaction systems, uniform-price auctions, or privacy-focused transaction submission. These upgrades made it harder for bots to detect pending trades or manipulate liquidity before a transaction was finalized.

While none of these solutions completely removed MEV, 2025 showed that the worst damage can be reduced. For users, using MEV-protected transaction options is becoming a new best practice. For developers, the message is clear: future DeFi apps must be built not just for yield or innovation but with stronger protections around security, fairness, and user safety.

Smart Contract Bugs and Exploits

2025 was one of the harshest years on record for smart-contract failures and protocol exploits. Losses reached into the billions, and by mid-year, industry trackers estimated that $2.1–2.5 billion had already been stolen or lost across hacks, rugpulls, and major protocol failures, surpassing the totals from all of 2024.

Some of the biggest blows came from large, high-profile incidents. In February, an exchange breach at Bybit resulted in roughly $1.46–1.5 billion being drained after what was later tied to a state-linked wallet compromise, one of the largest exchange hacks in recent memory. A few months later, the Sui-based DEX Cetus suffered an exploit that drained about $220–223 million from its liquidity pools. 

Additional Ethereum-ecosystem incidents, including a November Balancer breach, added tens of millions more to the year’s tally. Alongside these major events, dozens of smaller rugpulls and protocol failures quietly wiped out large pools of user capital and funnelled funds into attacker-controlled wallets.

Across these incidents, on-chain patterns were often similar: large transfers from project-controlled wallets to exchanges or fresh addresses shortly before prices collapsed, or flash-loan manipulation that drained pools within minutes. In cases like Cetus and other DEX exploits, investigators flagged spikes in outbound transfers and unusual liquidity-withdrawal activity in the hours leading up to the crash—signals that were visible on-chain before the full damage became public.

Common Patterns in 2025 DeFi Failures

Analysis of 2025’s major DeFi incidents revealed recurring patterns that contributed to hacks, rugpulls, and protocol failures. Understanding these patterns can help both users and builders recognize risks early and avoid costly mistakes.

1. Protocol-level bugs

Many DeFi failures stemmed from flaws in smart-contract code, including arithmetic overflows, precision errors, reentrancy issues, and timing vulnerabilities. These bugs sometimes allowed privileged accounts to bypass intended safeguards, giving attackers opportunities to drain funds or manipulate balances. Even well-audited contracts were not immune, as audits can miss subtle business-logic flaws or hidden privileges.

2. Cross-chain and messaging risks

Projects using cross-chain bridges or complex message-passing logic faced amplified risks. If a single chain were exploited, the vulnerability could propagate across other networks, causing multi-chain losses. Poorly implemented bridging protocols were particularly vulnerable to flash-loan attacks, state-manipulation exploits, and liquidity siphoning, often resulting in millions lost across multiple platforms.

3. Fake or misleading liquidity

Some platforms created the illusion of trust by adding temporary or team-controlled liquidity. Liquidity was sometimes locked only briefly to attract deposits, then withdrawn once investors committed funds. Users who didn’t verify liquidity sources or lock periods often faced sudden losses when liquidity dried up, a classic hallmark of rugpulls.

4. Aggressive yield promises

Unrealistic APYs or “too-good-to-be-true” returns were a common tactic to attract funds quickly. Many protocols promised extremely high yields to entice deposits without any underlying sustainable mechanism. This strategy often masked structural weaknesses, leaving users exposed to sudden losses when the promised returns proved unsustainable.

5. Influencer-driven hype

Marketing campaigns on social media platforms like X, Telegram, and YouTube created artificial excitement and fear of missing out (FOMO). Influencers and community hype amplified adoption before real usage existed, often masking low liquidity or anonymous teams. Many users invested based on hype alone rather than evaluating tokenomics, adoption, or security, resulting in preventable losses.

6. Anonymous or unverifiable teams

A lack of transparency was a major red flag in many failed projects. Teams often operated under pseudonyms, provided fake identities, or disappeared entirely once liquidity was drained. Without verifiable leadership, there was no accountability, making it difficult for users or authorities to recover funds or pursue legal action.

7. Smart contract backdoors and owner privileges

Hidden admin functions in contracts allowed developers to mint tokens, freeze transfers, or pull liquidity at will. These “owner privileges” were sometimes invisible to casual users and even auditors. Contracts with extensive privileged access posed high systemic risk, as a single malicious actor could trigger catastrophic losses.

8. Early warning signs

Many projects showed detectable signals before collapse:

A small number of wallets control most tokens or liquidityExtremely low active user counts compared to total value locked (TVL)Sudden, concentrated liquidity injections from a few addressesUnusual transfers to exchanges, mixers, or new addresses shortly before failure

Users who monitored these on-chain metrics and patterns could often detect risk before losing funds, while builders who recognized these red flags could design safer and more transparent protocols.

READ ALSO: 5 Powerful Charts, 25 Sector Drivers That Defined Crypto’s $4Trillion Year

Lessons for Users from 2025 DeFi Failures

The events of 2025 made it clear: due diligence in DeFi is no longer optional. Users must actively evaluate projects and monitor on-chain activity to avoid significant losses. Key lessons include:

1. Verify contract ownership

Always check who owns or controls a smart contract. Anonymous or unverifiable teams are high-risk because a single malicious actor could exploit privileged access to drain liquidity, mint tokens, or freeze user funds. Confirming ownership or identifying multisig governance structures can significantly reduce risk. Projects with multiple trusted signers tend to be safer because no single party can manipulate the protocol unilaterally.

2. Confirm liquidity locks

Ensure that liquidity is genuinely locked and for an adequate period. Some projects create the illusion of security by temporarily locking liquidity, only to withdraw it shortly after deposits are made. Tools that verify liquidity source, lock duration, and contract address transparency help users determine whether a protocol is trustworthy and reduce exposure to rugpulls.

3. Review code audits carefully

Audits are valuable but not infallible. Even “verified” contracts can have hidden vulnerabilities, owner privileges, or logic flaws that allow exploiters to bypass safeguards. Users should not assume a project is safe solely because it passed an audit. Reading audit reports for high-risk areas, known issues, and recommendations provides a clearer understanding of residual risks.

4. Examine token and liquidity distribution

A healthy project usually has a diverse set of token holders and active participants. Projects where most tokens or liquidity are concentrated in a few wallets are inherently risky because a single wallet can manipulate prices or withdraw large amounts suddenly. On-chain analytics tools can help users assess distribution patterns and the level of community engagement.

5. Prioritize team transparency

Favour protocols with transparent, verifiable teams or multisig administrative controls. When teams are accountable and visible, it reduces the likelihood of malicious activity or sudden withdrawal of funds. Transparency also allows users to follow the project’s progress, governance decisions, and public statements, building trust over time.

6. Monitor on-chain signals

Active monitoring of the blockchain can reveal early warning signs of trouble. Watch for sudden, large liquidity injections, disproportionate token transfers to exchanges, or unusual activity from a small number of wallets. Recognizing these patterns can help users exit risky positions before losses occur. Learning to interpret on-chain data is a valuable skill for anyone interacting with DeFi protocols.

7. Use risk-reduction tools

Leverage tools like MEV-protected transaction paths, slippage limits, or private transaction submission to reduce exposure to front-running, sandwich attacks, and other manipulative strategies. For larger trades or liquidity positions, these safeguards can prevent significant losses and improve overall security when interacting with volatile protocols.

8. Popularity doesn’t equal safety

Social media hype, influencer endorsements, or rapid adoption do not guarantee a project’s security. Many projects collapse despite appearing professional or growing quickly. Users must base decisions on fundamentals, code quality, governance, liquidity health, and user distribution, rather than FOMO-driven popularity. Careful research, ongoing monitoring, and cautious allocation remain critical.

In Conclusion

2025 showed how quickly DeFi can break when incentives, governance, and security don’t keep up with complexity. Rugpulls, MEV exploits, and smart-contract failures hit users, builders, and investors, and incidents like Mantra Network, Abracadabra, and HyperVault reflected recurring issues: protocol bugs, misleading liquidity, anonymous teams, aggressive yield promises, and exploitable owner privileges.

Looking ahead, these lessons can guide the ecosystem toward resilience. Builders should harden protocols, run preventive audits, and limit privileged access. Users should verify ownership, confirm liquidity locks, track distribution, monitor on-chain signals, and use risk-reduction tools. Combining careful assessment with proactive risk management is the most practical path to a safer, more sustainable DeFi environment.

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence. 

If you would like to read more articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.

Take control of your crypto  portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”