Decentralized finance protocol Balancer Labs is set to shut down its corporate entity following mounting legal risks and financial challenges, according to co-founder Fernando Martinelli.
The decision comes in the aftermath of a major exploit in November 2025, which exposed the firm to ongoing legal liabilities and highlighted structural weaknesses in its business model.
Martinelli stated that the closure is primarily driven by “real and ongoing legal exposure” stemming from the exploit, combined with the lack of sustainable revenue under the current operational structure.
Despite the shutdown of Balancer Labs as a legal entity, the Balancer protocol itself will continue to operate through a decentralized framework.
Under the proposed transition, the protocol will shift toward a model centered on a decentralized autonomous organization (DAO), supported by a foundation and independent service providers. This move reflects a broader trend in DeFi, where projects aim to minimize centralized risk while maintaining ecosystem continuity.
Alongside the structural transition, Martinelli has backed a series of significant changes to the protocol’s tokenomics and governance.
These include ending emissions of the BAL token, winding down the veBAL governance model, and redirecting 100% of protocol-generated fees to the DAO treasury. The changes are designed to improve long-term sustainability and align incentives within the ecosystem.
The November 2025 exploit, which reportedly resulted in losses exceeding $100 million, has had lasting implications for the protocol, both financially and reputationally.
The incident intensified scrutiny around DeFi security practices and highlighted the risks associated with complex smart contract systems.
By transitioning to a DAO-led structure and implementing sweeping economic reforms, Balancer aims to rebuild trust and ensure the protocol’s continued operation without reliance on a centralized corporate entity. The outcome of these changes will be closely watched across the DeFi sector.
