Saga Layer-1 in Crisis as TVL Crashes 55% and Token Plunges 25%, Here’s Why
Layer-1 blockchain protocol Saga has faced a severe crisis after a smart contract exploit on its SagaEVM chain resulted in nearly $7 million in losses.
The incident has compelled the team to halt operations, triggering a sharp sell-off of its native assets.
$7 Million Exploit Sparks Panic on Saga L1Saga confirmed in a statement that the exploit occurred on January 21, 2026. The Layer 1 (L1) cited a coordinated sequence of contract deployments, cross-chain activity, and subsequent liquidity withdrawals.
SagaEVM remains paused while we finalize the results of our investigation into the Jan 21 exploit.
We’re working with partners on remediation and will publish a post-mortem once findings are fully validated. $7M of USDC was bridged out and converted to ETH.
Extracted funds were…
They paused the chain at block height 6,593,800 while the team investigates and mitigates the incident. SagaEVM remains halted as engineers validate the full impact and implement safeguards to prevent further breaches.
“At this stage, SagaEVM remains paused while our engineering and security teams work through a full remediation process,” Saga said. “Our current focus is to stop further impact, validate the blast radius, harden affected components, and communicate only confirmed facts.”
The company emphasized that the Saga mainnet, consensus mechanisms, and validator security remain intact. Bad actors did not compromise signer keys.
What Happened and the Implications for Saga Dollar Token and Network’s TVL?Reportedly, the attacker exploited a vulnerability in the protocol’s cross-chain messaging system. With this access, they minted Saga Dollar (D) tokens out of thin air. They bridged them to Ethereum and converted to ETH via decentralized exchanges such as 1inch, CowSwap, UniV4, and KyberSwap.
Funds bridged to ethereum and swapped to ETH using 1inch, cowswap, uniV4, and kyberswap: https://t.co/nO5aHDb995
— Vladimir S. | Officer's Notes (@officer_secret) January 21, 2026Threat researcher Vladimir noted that the funds were traced to 0x2044697623afa31459642708c83f04ecef8c6ecb, and Saga is actively coordinating with exchanges and bridges to blacklist the address.
The immediate fallout was dramatic. Saga Dollar briefly lost its $1 peg, falling to $0.75, and its total value locked (TVL) plunged over 55% within 24 hours, dropping to $16.07 million.
Saga TVL. Source: DefiLlama
Meanwhile, data on CoinGecko shows the Saga Dollar token is currently trading around $0.7559, down 24% from its previous levels.
Saga Dollar (D) Price Performance. Source: CoinGecko
Cosmos Ecosystem Reeling: Mars Protocol Plots March Shutdown
The exploit echoes broader turmoil in the Cosmos ecosystem, where Mars Protocol announced a complete wind-down following a previous exploit that left roughly $960,000 in bad debt concentrated in its USDC lending market.
— Mars Protocol