cyclone3 fpga device failure

Default I/O standard for CIII is 3.3V LVTTL or 3.3V LVCMOS which have a current strength of 4 or 2 mA respectively. Did you change the default with a higher strenght value?

I don't know if this could affect DC operation, causing output stage overheating and damage; probably current strenght affects only AC operation, i.e. it improves switching speed. Anyway you'd better check this point.

Another point to consider is the maximum consecutive pins driving high current; this must be limited to a value reported in CIII datasheet.

Could this be your situation? Do you have many LEDs? I mean 20 or more; if you do, the pin driving them should be spread across banks around the fpga and not concentrated in a single side/corner.