Carrot shuts down weeks after Drift exploit slashed protocol value

Carrot has announced it will shut down operations following losses linked to the Drift Protocol exploit earlier this month.

The team said the impact of the incident had proven “catastrophic” for its continued operations. Users have been given until 14 May to withdraw funds from products including Boost, Turbo, and CRT before the system begins a full deleveraging process.

According to the announcement, all leverage will be reduced to zero, freeing liquidity for token redemptions.

From emergency measures to full shutdown

The shutdown follows weeks of attempts to stabilize the protocol after the initial fallout.

On 2 April, Carrot said the Drift exploit had resulted in significant losses for users. Assuming no recovery of funds, CRT holders were facing an estimated ~50% loss, forcing the protocol to adjust valuations and begin restructuring.

At the time, the team moved to restrict withdrawals in certain markets, reduce leverage, and consolidate assets to support redemptions.

TVL collapse underscores severity of fallout

Data from DefiLlama shows Carrot’s total value locked [TVL] dropped sharply following the Drift exploit.

The protocol held roughly $28 million in TVL on 1 April, the day of the incident. Since then, liquidity has steadily declined, falling to around $2 million as users withdrew funds and positions were unwound.

The drop highlights the scale of the impact, with more than 90% of capital exiting the protocol in the weeks after the exploit.

Not hacked, but still forced to close

Carrot was not directly exploited.

Instead, its exposure to the Drift ecosystem created a second-order impact that ultimately proved unsustainable.

This type of indirect failure—where losses from one protocol spread to another—has become an increasing concern in DeFi, particularly as platforms grow more interconnected.

Users face withdrawals and uncertain recovery timeline

While users are being allowed to withdraw funds, the final outcome will depend in part on whether any assets are recovered from the Drift exploit.

Carrot said any future recovery would be distributed to users based on previously recorded balances, though no timeline has been provided.

The protocol added that it will remain active to manage this process even after winding down operations.

Final Summary

• Carrot is shutting down after losses tied to the Drift exploit, with TVL falling from around $28m to $2m, and users given until 14 May to withdraw funds.
• The collapse highlights DeFi contagion risks, where protocols can fail due to exposure rather than direct exploits.