Tectonic reportedly lost about $75 million after an attacker manipulated the price of a thinly traded governance token and used the inflated value as lending collateral. Cronos halted block production shortly after the incident, and validators later rolled back the chain state for the funds that had not already left the network.
The core issue is not a broken smart contract in the narrow sense. It is a valuation problem: if a protocol trusts a market price that can be moved cheaply, the attacker can make weak collateral look valuable enough to drain stronger assets.
Protocols that support low-liquidity tokens need stronger controls than a simple spot price feed. Useful defenses include liquidity thresholds, time-weighted pricing, conservative haircuts, per-asset borrow limits, and emergency pauses when price movement is abnormal.
Operationally, teams should monitor for sudden price spikes in listed collateral, especially governance tokens with shallow markets. The safest default is to assume that thin markets are manipulable and design liquidation, borrowing, and oracle logic accordingly.