In a simulated cyberattack, a malicious actor exploited a critical vulnerability in an AI Governance DAO's smart contract code, draining millions in funds. The attacker manipulated a flawed validation mechanism, bypassing security protocols to siphon assets from the DAO's treasury. The breach exposed weaknesses in the contract’s audit process, highlighting the risks of untested code in decentralized systems. Funds were funneled to untraceable wallets, leaving the DAO crippled. This simulation underscores the urgent need for rigorous code audits, multi-layer security, and real-time monitoring in AI-driven governance systems to prevent catastrophic losses and maintain trust in decentralized ecosystems.