Full Sail was suspended due to switchboard prediction of an event...

Why is Full Sail gradually shutting down?

Full Sail, a decentralized financial protocol operating on the Sui blockchain, is initiating a shutdown process after encountering a security incident. The incident involved Oracle provider Switchboard, which resulted in losses to multiple of its automated vaults. The agreement said on Tuesday that it had begun to phase out operations and immediately banned incentive claims from new deposits and liquidity providers. Once the final security check is completed, its regular fund pool is expected to enter withdrawal-only mode. Full Sail said the top priority now is to compensate affected users. The agreement plans to use its remaining agreement-owned liquidity to compensate, and the team has committed to making up any differences to ensure community depositors are repaid before other claims.

The closure stems from an incident disclosed on Saturday. At that time, Full Sail confirmed that the funds had been lost and temporarily suspended deposits and withdrawals while investigating the reasons. Full Sail later said an attacker stole approximately $91,000 from three of its vaults. Although the loss was relatively small compared to major DeFi exploits, the decision to opt for shutting down rather than resuming normal operations suggests that security failures in key external dependencies could threaten the viability of smaller protocols.

What role did Switchboard play in this incident?

The incident was related to a suspected intrusion into Switchboard. Switchboard is a Oracle provider that provides external data for blockchain applications. Oracles are crucial to DeFi systems because lending markets, automated vaults and derivative agreements often rely on them to obtain asset prices and other information used to execute transactions. Switchboard said on Saturday it was investigating a potential intrusion involving its implementation on the Move language. The company suspended its networks on Aptos, Sui, IOTA and Movement while reviewing the issue. This cross-chain response is important because it shows that potential exposure is not limited to Full Sail or Sui. Other Move network-based applications that use the affected oracle infrastructure must also assess whether their contracts or price sources are vulnerable.

Full Sail's automated vault is one of the systems affected. Once oracle input becomes unreliable or may be manipulated, automated strategies may use the wrong data to execute transactions, calculate collateral values, or release assets. As a result, a relatively narrow infrastructure weakness could quickly spread to other agreements that rely on the same service.

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The closure of Full Sail shows that DeFi security risks are not limited to the protocol's own smart contracts. Applications can inherit vulnerabilities from oracle providers and other infrastructure partners, making third-party dependencies an important part of assessing protocol risk.

Are other DeFi protocols affected?

Full Sail was not the only project to report losses related to the incident. Virtue, a stablecoin lending agreement operating on IOTA, said it lost approximately $455,000 and its guarantee of VUSD stablecoin had been compromised. The larger losses suffered by Virtue demonstrate how the same infrastructure issues can produce different results depending on the way the oracle is used for each protocol and the amount of capital exposed through the affected contracts. The stablecoin system carries an additional layer of risk because losses not only affect protocol liquidity, but also the assets that support the token itself. If the value of the secured assets is less than the amount of stablecoins in circulation, holders may begin to question redemption value and liquidity, potentially extending the impact beyond the initial exploit.

This incident also illustrates the concentration risk that arises when multiple DeFi applications rely on the same infrastructure provider. Shared oracle systems make development easier and provide consistent data across different chains, but one intrusion can expose multiple otherwise unrelated protocols at the same time.

What should Full Sail users do now?

Full Sail is expected to release detailed withdrawal and compensation instructions in the next few days. Before their final security check is completed, users need to wait for an agreement to confirm when regular funds pools can safely enter withdrawal-only mode. The repayment plan reduces some of the direct financial risk to depositors because Full Sail has said it will use the agreed own liquidity first and the team will make up for any remaining deficit. The final result will depend on the amount of funds available, verification of the affected balance, and the claims process established during the closure process.

For the DeFi domain, this event adds another case where infrastructure risk translates into protocol risk. When applications rely on external price sources, cross-chain bridges, custodians, or other third-party systems, smart contract auditing alone cannot eliminate risk. The broader question now is whether Switchboard can pinpoint the exact source of the intrusion, and whether the applications on Aptos, Sui, IOTA, and Movement require additional changes to get the affected Oracle services back up and running. For Full Sail, however, the event has had a permanent consequence: the agreement opted for repayment and closure rather than attempting to rebuild after suffering losses.