K9 Finance has issued a warning to Shibarium, threatening to terminate their partnership following a significant breach in September that resulted in considerable losses for the decentralized finance (DeFi) platform and its users. This ultimatum came after K9 Finance reported losses exceeding $700,000 in KNINE tokens, as well as various other cryptocurrencies including Ethereum (ETH), Shiba Inu (SHIB), LEASH, ROAR, and TREAT.
The DeFi platform has set a deadline of January 6, 2026, for the Shiba Inu team to fully reimburse affected users. If this demand is not met, K9 Finance plans to conduct a formal review of their collaboration with Shibarium. This announcement was made via a message from the K9 Finance DAO”s official account on X, formerly known as Twitter, on Thursday.
The breach that prompted this action involved a flash loan exploit that enabled the hacker to gain control over a majority of validator voting power on Shibarium”s Layer-2 network. The attack allowed the hacker to extract around 224.5 ETH, which was valued at approximately $1.03 million, along with 92.6 billion SHIB, worth about $1.27 million. Additional tokens including Doge Killer (LEASH), Shiba Inu”s TREAT, and Shifu (SHIFU) were also compromised.
Following the attack, the Shiba Inu team attempted to incentivize the hacker by offering a reward of 50 ETH in exchange for not returning the stolen assets, while K9 Finance also proposed a 5 ETH bounty for the retrieval of their frozen tokens. In their statement, K9 Finance stressed that they complied with all procedural requests from the Shiba Inu team throughout the recovery process after the hack.
Despite maintaining open communication channels with the Shiba Inu team in the months following the incident, K9 Finance reported that these discussions eventually halted. “K9 Finance DAO has followed every step requested by the Shib team regarding the Shibarium bridge hack and the process to make affected users whole,” the organization stated. “At this time, we have received no further communication or guidance in any of our private chats with the Shib team. The decision should not be interpreted as an attempt to create drama. It is a necessary step to provide clarity to our holders and ensure responsible governance,” they continued.
The incident has raised significant concerns regarding the security and governance of the Shibarium network, especially since out of the twelve validator signing keys, ten approved the hacker”s fraudulent state. Only validators operated by K9 Finance and UnificationUND rejected the request to approve the malicious root.
K9 Finance has made it clear that if complete restitution is not achieved by the specified deadline, the DAO will convene to vote on the future of their relationship with Shibarium, including assessing the viability of continuing operations on the chain for the long-term health of the K9 ecosystem.
