Key Points:
- Saga pauses its EVM chain due to a $7 million exploit based on cross-chain minting and liquidity extraction.
- The hacker minted uncollateralized Saga Dollar, bridged it to Ethereum, and swapped it to ETH, which led to the stablecoin depeg event.
- The event has also ignited debate over cross-chain security in the Saga and Cosmos networks following the moment Saga pauses its EVM environment.
Saga Pauses EVM Blockchain Due to $7M Exploit
The SagaEVM chain of the Saga network was paused by the team on January 21, 2026, after a smart contract hack resulted in the loss of almost $7 million in the network. The team paused the SagaEVM chain with a block number of 6,593,800 after the observation of irregular smart contract deployments as well as cross-chain transactions that drained the funds out of the system.
According to Saga, the attacker bridged roughly $7 million in USDC out of SagaEVM and converted it into ETH on Ethereum, using decentralized exchanges. The exploit was not caused by validator compromise or consensus failure but by a vulnerability in SagaEVMโs cross-chain contract logic.
The project stated that SagaEVM remains paused while the investigation continues and remediation measures are finalized. Saga is coordinating with exchanges and bridge operators to blacklist the attackerโs wallet and reduce the risk of further fund movement.
How the Cross-Chain Exploit Collapsed Saga Dollar and TVL
An investigation revealed that the hacker used Sagaโs cross-chain messaging system for minting Saga Dollars (D) because the Saga Dollars did not have the right collateral backing. This counterfeit token was then bridged on Ethereum, which resulted in the instantaneous exchange of ETH on 1inch, CowSwap, Uniswap v4, and KyberSwap exchanges.
After the exploit was made public, the peg of the Sagad Dollar fell, causing it to trade for a brief period around $0.75. This ignited a ripple of panic withdrawals in the SagEVM network since its liquidity providers started withdrawing after Saga pauses due to the vulnerability of the stablecoin.
On-chain analytics revealed that SagaEVMโs Total Value Locked (TVL) dropped by over 55% in a span of 24 hours, reaching around $16 million. Sagaโs degraded EVM environment due to a stablecoin depeg and evaporating liquidity sapped market confidence.
Why the Saga Exploit Matters for the Cosmos Ecosystem
Saga specifically clarified that the exploit did not impact its SSC mainnet or validator set or consensus layer, meaning its Layer-1 base chain is still functioning. Unfortunately for Saga EVM, its role as a DeFi execution platform has been heavily impacted by its failed cross-chain security solution.
The timing of the Saga exploit also comes as Mars Protocol, another project built on the Cosmos network, suffered a collapse following the announcement of a shutdown due to an exploit and a lack of liquidity, a period in which Saga pauses added further stress to the ecosystem.
Saga is committed to issuing a full technical analysis that details the attack that happened, as well as changes that will be implemented in the process. Until the analysis is done and the trust in the Dollar Saga is renewed, the SagaEVM is most likely going to be under intense risk analysis after Saga pauses.
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