A nearly $300 million exploit on a smaller crypto project has sent shockwaves through the decentralized finance (DeFi) industry.

Panic over the weekend caused investors to pull $9 billion from Aave, the market’s largest lending platform, creating a massive liquidity crisis.

The chaos started when hackers took about $200 million of stolen digital tokens and deposited them onto Aave. Instead of selling the stolen funds immediately, the attackers used them as collateral to borrow other cryptocurrencies.

This unusual move terrified everyday depositors, who feared the collateral backing the platform might now be worthless.

According to data from industry tracker DefiLlama, the net outflows since the news broke on Saturday have…