Full Sail, a decentralized finance (DeFi) protocol built on the Sui blockchain, says it is shutting down after a security incident tied to an oracle provider. In a public update on Tuesday, the team announced it would disable new deposits and stop liquidity provider (LP) reward claims as part of its wind-down process, with the priority focused on compensating affected users.
According to Full Sail, the decision follows losses stemming from issues in the protocol’s automated vaults. The team linked the incident to a suspected compromise of Switchboard’s oracle infrastructure, which is responsible for feeding price and other data into on-chain systems.
Key takeaways
- Full Sail is winding down permanently and has disabled new deposits and LP reward claims immediately.
- Withdrawal-only mode will follow after the protocol completes final security checks.
- Full Sail attributes the incident to Switchboard oracle infrastructure after a suspected oracle compromise affected automated vaults.
- User compensation is the stated priority, with remaining protocol liquidity intended to cover refunds and the team seeking to address any shortfall.
A shutdown triggered by oracle-linked vault problems
The wind-down comes after a sequence of updates beginning with Full Sail’s first disclosure on Saturday. In an X post, the protocol said it had confirmed that funds were lost and paused deposits and withdrawals while investigations were underway.
Full Sail later clarified that an attacker removed roughly $91,000 from three of its vaults. The incident was associated with its automated vault system—an architecture that typically relies on oracle inputs to operate correctly and safely.
At the time, Switchboard also addressed the issue. In its own X post on Saturday, Switchboard said it was investigating a potential compromise of its Move-based implementations and that it had halted its network on Aptos, Sui, IOTA, and Movement. That multi-chain pause suggests the suspected issue was broader than a single deployment, increasing the likelihood that multiple oracle-consuming applications could be impacted.
Broader collateral stress seen in connected lending markets
While Full Sail reported losses in its own vaults, other ecosystem activity indicated the risk may have spilled beyond one protocol. Virtue, a stablecoin lending platform connected to the IOTA ecosystem, said it experienced separate losses—reporting about $455,000 and stating that the backing of its VUSD stablecoin had been impaired.
These reports matter for DeFi users because stablecoin lending and collateralized borrowing can be highly sensitive to oracle correctness. If oracle feeds are manipulated—or become unreliable—vaults and lending positions may not behave as expected, potentially leading to rapid loss of collateral value or exploitable liquidation conditions.
Even where a protocol does not directly hold the impacted chain’s liquidity, an oracle-linked failure can still propagate through the DeFi stack via shared infrastructure assumptions.
Immediate actions: deposits frozen, rewards paused, then withdrawals
In Tuesday’s announcement, Full Sail outlined concrete steps for winding down operations. The protocol said it would:
- Disable new deposits right away.
- Stop LP reward claims immediately.
- Move regular pools to withdrawal-only mode after completing final security checks.
This approach is typical for protocols attempting to prevent further damage during incident response. By freezing new inflows and halting reward distribution, teams reduce the surface area for exploitation and lower incentives for users to interact with a system whose safety assumptions may still be under review.
Full Sail also stated that it expects to publish detailed withdrawal and claim instructions within the coming days. For users, those instructions will likely determine how compensation will be processed and how remaining assets will be allocated—especially important when a protocol has suffered partial losses or when multiple user classes may be involved.
Compensation plan and remaining uncertainty
Full Sail said it will use remaining protocol-owned liquidity to compensate users. It also indicated that the team will cover any shortfall so community depositors are repaid first.
While that statement is intended to reassure affected users, the final outcome depends on several variables that readers should watch closely: the total amount recoverable from compromised vaults, whether any portion of the removed funds can be retrieved, and how the protocol’s remaining liquidity compares to users’ claims.
As with many DeFi incident responses, the next milestone will be operational transparency. Full Sail’s promised withdrawal and claim instructions should clarify timelines, eligibility, and the mechanics of repayment—elements that often determine whether users can recover capital smoothly or face extended delays.
More broadly, the incident underscores a recurring industry tension: oracle providers sit at a critical junction between on-chain logic and real-time data. When an oracle infrastructure compromise triggers cross-chain actions—as Switchboard described by halting on several networks—protocols that depend on those feeds may face emergency shutdown decisions even if the core smart contract code is unchanged.
For now, users should focus on Full Sail’s next update for withdrawal and claim procedures, while monitoring further disclosures on the suspected Switchboard compromise and any downstream effects on other oracle-dependent protocols.
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