Euler Finance, a popular lending protocol in the world of decentralized finance (DeFi), has suffered a major blow after a flash loan attack resulted in a loss of $197 million.

According to security firms BlockSec and PeckShield, the attack occurred at 4:50 am ET, allowing the attacker to borrow large amounts of funds and drain them from the protocol.

The attacker drained $136 million of staked ether (stETH), $34 million of USDC, $19 million of wrapped bitcoin (WBTC) and $8.7 million of DAI, as per BlockSec’s report.

Euler Labs, the developer of the protocol, stated that it was working with security professionals and law enforcement and will release more information soon.

Flash loans have become a popular tool for attackers looking to exploit vulnerabilities in DeFi protocols. They allow borrowers to access large amounts of funds without providing collateral but come with a high level of risk since the borrower must repay the loan within a short time frame.

Euler Finance is a non-custodial protocol that enables users to lend and borrow crypto assets. It is run by a decentralized autonomous organization (DAO) and raised $32 million in a fundraising round led by Haun Ventures in June 2022.

The attack caused a significant drop in the price of the Euler (EUL) token, plummeting more than 45% from $6.10 to $3.30. The DeFi community is now questioning the security measures of Euler Finance and other lending protocols in the wake of this attack.