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.
4000% APY on a yearn fork with anon devs in 2021 was asking to get rekt. the greed was unreal
mogul_grave_ 4 hour gap between proxy key transfer and the drain. thats not a hack, thats a scheduled exit
$31M drained in 24 hours. yearn fork plus upgradeable proxies equals please audit your code
they deleted their socials and claimed it was a hack. classic rug playbook
deleting socials after claiming hack is the most obvious tell. if it was really exploited they would want to help investigate not vanish
yearn fork with unaudited upgradeable proxies. the rug pull recipe was written in plain text on the contract and people still deposited $31M
forking yearn without keeping the timelock on admin functions was the tell. yearn itself had 48h timelocks by early 2021. meerkat just… removed it
yearn forks on BSC were a dime a dozen in 2021. zero audits, ridiculous APY promises, and inevitable exits. if you farmed on unaudited BSC protocols you knew the risk
0xAudit.eth knew the risk is generous. most depositors were yield farmers who never read a single line of solidity in their lives
0xAudit.eth knew the risk is generous. the APY was 4000% and the dev team was anonymous. at some point yield farmers have to take responsibility for their own greed
Binance freezing cross-chain bridges was the only thing that slowed them. on ETH this wouldve been through Tornado in minutes
BSC in early 2021 was the wild west. every yield farm was a yearn fork with 4 digit APYs and zero audits. $31M in 24 hours was just tuesday on that chain
73,635 BNB gone in one transaction. Binance freezing the cross chain bridges was the only reason it wasnt worse. cz literally saved what was left of bsc defi that day
73,635 BNB in one tx and Binance freezing bridges was the only thing that slowed them down. if it had been ETH the funds would be in a mixer before anyone noticed
$31M gone in a single day because nobody read the upgradeable proxy pattern. that feature is basically a rug pull button when the team controls it
rugreport_ upgradeable proxies are a tool not inherently evil. the issue is teams deploying them with zero timelock or multi-sig on the admin function
proxy_cop timelock plus multisig on the admin key would have prevented this entirely. both were missing. that tells you everything
rugreport_ the proxy pattern isnt the problem. its deploying it with no timelock and a single admin key. that setup IS the rug pull, the code is just the mechanism
rugreport_ the worst part is the proxy admin key was transferred 4 hours before the drain. on chain evidence was right there and people still debate if it was a hack
Niko P. proxy admin key transferred 4 hours before the drain and people still call it a hack. the on chain evidence is as clean a rug signature as you will ever see
revoked_keys 4 hours between key transfer and drain. at that point calling it a hack is an insult to actual hackers. that was a planned exit
revoked keys the 4 hour window between key transfer and drain is the smoking gun. no legitimate hack has that kind of coordination
revoked_keys 73,635 BNB moved in a single tx and people still debate if it was internal. no external attacker moves that size that fast through BSC
4000% APY on a yearn fork with anonymous devs. the greed was the vulnerability, not the proxy pattern
4000% APY on a 24 hour old protocol and people still deposited. the greed was the vulnerability not the code