In what has quickly become one of the most brazen decentralized finance exploits of early 2021, Meerkat Finance — a yield vault protocol built on Binance Smart Chain (BSC) — was drained of approximately $31 million in crypto assets on March 4, 2021, just 24 hours after launching. The incident sent shockwaves through the rapidly expanding BSC ecosystem and reignited debates about the security of forked DeFi codebases.
TL;DR
- Meerkat Finance lost ~$31M (13.96M BUSD + ~73,635 BNB) in a suspected rug pull
- The exploit occurred just one day after the protocol launched on BSC
- Attacker manipulated upgradeable smart contract proxies to take ownership of vaults
- Project deleted social media accounts after initially claiming it was a hack
- Binance closed cross-chain bridges in response; bscscan.com briefly went offline
How the Exploit Unfolded
Meerkat Finance was a yield farming vault project that had forked its code from Yearn.Finance, one of Ethereum’s most prominent DeFi protocols. The project launched on BSC on March 3, 2021, attracting significant capital from yield-seeking depositors drawn by the promise of high returns on the cheaper, faster Binance Smart Chain.
Within a single day, the protocol’s deployer executed a series of calculated transactions that would drain the vaults entirely. The attacker exploited the OpenZeppelin Transparent Proxy Upgrade pattern used by both the BUSD and WBNB vaults. Specifically, the Meerkat Finance deployer called the upgradeTo() function twice — once for each vault — replacing the legitimate vault logic with malicious implementations.
These upgraded contracts contained a permissionless init(address owner) function with no access controls, effectively allowing anyone to claim vault ownership. Once the attacker had established themselves as the vault owner, a custom function (signature 0x70fcb0a7) was called to drain all deposited funds directly to the attacker’s wallet.
The Aftermath
The project’s response to the incident only deepened suspicions within the crypto community. Meerkat Finance initially claimed the drain was an external hack, but shortly thereafter deleted all of its social media accounts — a hallmark of an exit scam rather than a genuine security breach.
Binance moved quickly to contain the fallout, shutting down cross-chain bridges to prevent the stolen assets from being moved off BSC. Interestingly, bscscan.com, the primary block explorer for the network, also experienced a brief outage during the incident, leading to further speculation within the community about whether this was a technical consequence of increased traffic or something more deliberate.
The stolen funds — 13.96 million BUSD and approximately 73,635 BNB — made Meerkat Finance the third-largest DeFi exploit at the time of the incident, landing prominently on industry tracking leaderboards.
Forked Code, Familiar Vulnerabilities
The Meerkat Finance incident highlighted a broader problem in the BSC DeFi ecosystem at the time. As protocols rushed to replicate Ethereum’s “DeFi summer” on Binance’s faster and cheaper chain, many simply forked existing Ethereum protocols without conducting thorough security audits. The speed of this expansion — what some analysts described as a “speed run” through Ethereum’s DeFi evolution — meant that the accumulating capital in these forked projects eventually attracted malicious actors.
The use of upgradeable smart contracts, while a legitimate design pattern that allows protocols to fix bugs and add features, introduces a fundamental trust assumption: users must trust that the deployer will not abuse the upgrade mechanism. Established projects like Yearn implement additional safeguards, such as checks that prevent the team from withdrawing assets actively being used in strategies. Meerkat Finance had no such protections.
Why This Matters
The Meerkat Finance rug pull served as a stark warning to the DeFi community about the risks of unaudited, forked codebases — particularly on newer chains where the rush to capitalize on yield farming hype can overshadow basic security practices. The incident underscored the critical importance of thorough smart contract audits, robust access controls, and multi-signature requirements for critical contract functions. For investors, it was a costly reminder that high yields often come with correspondingly high risks, and that the provenance and security of a protocol’s code should be verified before depositing any funds.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your own research before investing in cryptocurrency or DeFi protocols.
one day. ONE DAY after launch. if that doesnt tell you everything about yield farming on BSC in early 2021 i dont know what will
73,635 BNB gone in 24 hours. and people still aped into the next BSC fork the same week. degens never learn
Forking Yearn code and nobody audited the proxy pattern. The upgradeTo() exploit was a known vector even back then.
deleting social media accounts after claiming it was a hack is the biggest tell. exit scam 101
Binance shutting down cross-chain bridges was the right call but it also trapped legitimate funds. collateral damage is always the worst part