<h2 class="wp-block-heading">TL;DR</h2>



<ul>
<li>In May 2023, a DeFi platform, Fintoch, rug pulled its users for $31.6M.</li>



<li>Fintoch claimed to be backed by Morgan Stanley, had a fake CEO played by an actor, and offered outrageous 1% daily returns.</li>



<li>The case goes in DeFi history as the biggest exit scam of 2023.</li>
</ul>



On May 22, 2023, Fintoch – a fraudulent DeFi exchange operating on BSC – <a href="https://hacken.io/discover/rug-pull-explained/">rug pulled</a> their investors with a shocking $31.6 million scam. A reputable on-chain analyst, ZachXBT, was the first to draw widespread media attention to this scam.



<h2 class="wp-block-heading">Key Events in Fintoch Crypto Scam</h2>



<ul>
<li>Launched in March 2023, Fintoch posed as a legit DeFi platform with backing from the prominent Morgan Stanley. However, Morgan Stanley <a href="https://www.morganstanley.com/content/dam/msdotcom/global-offices/pdf/Indonesia/Indonesia_Fintoch_Important_Notice.pdf">debunked</a> these claims in a statement in May.&nbsp;</li>



<li>In early May, the Monetary Authority of Singapore (MAS) <a href="https://t.co/6rneqrEikZ">issued</a> a cautionary investor warning regarding Fintoch. Around the same time, Fintoch made claims of launching its own blockchain.</li>



<li>Fast forward to May 22: stolen USDT finds its way to TRON and Ethereum network. On May 23, the platform abruptly halted withdrawals, citing a supposed chain migration.</li>



<li>However, the real bombshell dropped a day later. It was on May 24 that a collective outcry about the withdrawal issues on X raised the alarm among on-chain experts, ultimately leading to the exposure of the scam.</li>



<li>A bonus twist? Bob Lambert, the supposed CEO of Fintoch, turned out to be nothing more than a paid actor! His real name is <a href="https://www.imdb.com/name/nm2697626/">Mike Provenzano</a>, and he has played in several short films and series.&nbsp;</li>
</ul>



A total of $31.6 Million was stolen from deceived users.



<figure class="wp-block-image"><img src="https://lh3.googleusercontent.com/B-wmv_o9Q3raridTd91gpZ3Weq5SaHdapHP23dBj-z10HVlU4ungNZCRfQTZQFalRWGj4LondmbZqsGcnNiG3TPgG6nmPJWvKrHpmvuxIYV4oXU-BUDN1DJgsVNMMA43ss04dbHV7xzLmDoyPdSghK4" alt="Bob Lambert - a paid actor was posing as the CEO of Fintoch."/></figure>



<h3 class="wp-block-heading">Looking Through Deception: How Fintoch Deceived Everyone?</h3>



Fintoch lured investors with the promise of a 1% daily ROI and claimed affiliation with Morgan Stanley. Although investors were warned numerous times, people rode the bandwagon and invested millions.



The Fintoch rug pull scam used deceptive techniques, including:



<ul>
<li>False Identity: Claimed ties to Morgan Stanley, used actor Bobby Lambert as fake CEO.</li>



<li>Unrealistic Returns: Promised unsustainable 1% daily returns indicate a Ponzi scheme.</li>



<li>Social Media Deception: Used platforms like X and Telegram, used bots and shills for fake reviews on Trustpilot and Medium.</li>



<li>Blockchain Tricks: Used smart contracts for fund collection and bridges for moving stolen assets across blockchains (e.g., Tron, Ethereum) to operate covertly.</li>
</ul>



<h2 class="wp-block-heading">What Sparked The Suspicion?</h2>



On May 24, Fintoch transferred <a href="https://www.chainabuse.com/report/1b126c11-b07b-4f40-9e11-149fa006d12f">31.6 million USDT</a> to multiple addresses on the Tron and Ethereum networks:



<ol>
<li>The DFintoch project deployed the <a href="https://bscscan.com/tx/0x3ef479ba75e07ad04f02b5a5f4df476bbbc83bb5d15fdcd2acd1955a4e87fce6">FintochSTO contract</a>. During deployment, 100,000 FTH tokens were minted and sent to the 0xfcE4.. address.</li>



<li>On May 22, 2023, a transfer of 34,341 FTH tokens was made from 0xfcE4.. to 0x19a0..</li>



<li>After that, the scammers <a href="https://bscscan.com/tx/0xa5e64161928ee40f6af02a32fc5c1fb9efa05cca6b91d88326279329b71c7ea2">swapped</a> FTM tokens to BSC-USD and used Multichain and SWFT to bridge the stolen funds.</li>
</ol>



This move caused panic among investors as they reported being unable to withdraw their assets.



Following Fintoch’s silence on the withdrawal issue, several users flocked to the comment section of the platform’s last tweet, published on May 23, demanding an explanation. Their pleas were met with cold automated bot responses.



After a few days of inactivity, on May 26, the stolen USDT started <a href="https://twitter.com/zachxbt/status/1661921410367774722">moving on Tron to different deposit addresses</a> on exchanges like Binance and Huione Pay.



So far, there has been no legal action or reimbursement plan, as the identities of the real founders remain anonymous.&nbsp;



<figure class="wp-block-image"><img src="https://lh6.googleusercontent.com/FSK1pX_fo6ySQEGqLY0x54c5plFVRGJ906vj_Fu7pKKESX9LvOSPk0f-_1vl7pb-fJFK0LbRdm8OEX_CjoL5osqKTYmKeTKvcmhnghd98cgdaGmoMGawHdiHnqHvCQx52ipVaR8EUqE9esjp9JivMtk" alt="An illustrative representation depicting the flow of stolen funds."/><figcaption class="wp-element-caption">Source: <a href="https://x.com/zachxbt/status/1661129110062788608?s=20" target="_blank" rel="noreferrer noopener nofollow">ZachXBT</a></figcaption></figure>



<h3 class="wp-block-heading">Aftermath &amp; Reactions</h3>



The aftermath of the Fintoch rug pull scam had a profound impact on both investors and the reputation of DeFi.&nbsp; First and foremost, investors who had put their money into FTC (the Fintoch native token) found themselves in a tough spot, holding onto assets that had essentially lost their value.&nbsp;



What made matters worse was that the Fintoch team remained anonymous, leaving these investors with no real options for recovery or legal action. But the ramifications extended beyond the immediate victims. The scam shed a bad light on the reputation of crypto, implanting seeds of skepticism, especially toward emerging DeFi projects.



This incident didn't just impact the interest of disheartened investors. It also drew the attention of regulators, legislators, and the media. BSC, where FTC had been actively traded, also took a hit.



<h2 class="wp-block-heading">Post-Hack Security Measures &amp; Lessons Learned</h2>



Fintoch was a Ponzi project that showed all the warning signs of an exit scam. Many of the project’s claims — its CEO, affiliation with Morgan Stanley, and registration in Silicon Valley — were completely fabricated.



It promised guaranteed ROI and multiple organizations issued warnings about the scam. Despite this, the founders were able to net over $31M of user funds. This Fintoch rug pull was one of the largest <a href="https://www.coindesk.com/tech/2023/06/02/crypto-investors-lost-54m-to-rugpulls-scams-in-may-blockchain-security-firm-defi/">exit scams in the DeFi in 2023</a>. And it highlighted the risks and vulnerabilities of investing in unregulated and unverified projects.



In our view, the best approach is to check a project’s rating by <a href="https://coinweb.com/comparisons/best-smart-contract-audit-companies/">different auditing companies.</a> It gives you a heads-up if there is something suspicious.

Fintoch Rug Pull Explained

TL;DR



<ul>
<li>SushiSwap suffered a reentrancy attack on April 9, 2023.</li>



<li>The attackers stole $3.3 Million, but white hats gracefully recovered over 1,000 ETH.</li>



<li>The hacker exploited a vulnerability in a new routing contract launched four days before the attack.</li>
</ul>



On April 9, 2023, unknown hackers managed to steal $3.3M, with one user @0xsifu losing 1,800 ETH. The main flaw? The hacker exploited an “approve-related bug” in the RouterProcessor2 smart contract, which caused a failure to validate access permissions halfway through a swap transaction.



Key points:



<ul>
<li>The exploited contract was introduced four days before the hack.&nbsp;</li>



<li>All users who had approved the RouteProcessor2 contract were at risk.</li>



<li>The risk spanned across 14 chains: Arbitrum Nova, Arbitrum, Avax, Boba, BSC, Ethereum, Fantom, Fuse, Gnosis, Moonbeam, Moonriver, Optimism, Polygon, Polygon ZkEVM.</li>
</ul>



Fortunately, the contract had relatively few approvers, which limited the breach's scale, preventing it from being even more significant. The total losses accounted for <a href="https://rekt.news/sushi-yoink-rekt/">$3.3 million</a>.



<h2 class="wp-block-heading">Vulnerability &amp; Root Cause</h2>



There was a sneaky flaw in the swap transaction involving permissions. But the main cause of the hack was – the RouteProcessor2 contract, which was barely four days old when the hackers struck.



Let's dig deeper.&nbsp;



<h3 class="wp-block-heading">What Made It Such An Easy Target?</h3>



Firstly, the contract failed to properly validate the route parameter that users were sending for the processRoute function. This gave attackers the keys, and they steered that route right to their malicious controlled pool.



Then, the hackers summoned the swapUniV3, which did a nifty trick – it changed the lastCalledPool variable to their pool's address and quickly stopped at the swap function of the malicious pool.



Next, that swap function called uniswapV3SwapCallback to check if the sender was the lastCalledPool. And guess what? The callback was accepted since the attacker manipulated that value to point to their pool's address.



Using it, the attacker constructed transactions with one goal – to drain tokens from the accounts of those unsuspecting users who had given the green light to the new RouteProcessor2 contract.



<figure class="wp-block-image"><img src="https://lh6.googleusercontent.com/mXxN0BiXr6dBuaQKLqmV8ep7jDJdBpnKwuPrN_Vs1_fC33fQUKyTTe5BdVT-6tCmiwDVrc5t386eItB-VgZl7cjVIHQCpzV-_kS01BT5rzKrlAshmHORyDekD9X5H05vEkhfuyblx-Vqczd91mdT6ZI" alt="Attackers created a malicious pool to exploit the validation bug and drain funds."/></figure>



<h2 class="wp-block-heading">What Tools and Techniques Were Used By Hackers?</h2>



SushiSwap hacker employed the following methods:



<ul>
<li>Etherscan – to monitor the activity of the RouterProcessor2 contract and identify potential victims.</li>



<li>Approval exploit – to steal funds from SushiSwap’s RouterProcessor2 contract, bypassing the permission check by manipulating the storage slot.</li>



<li>Flash loans – to obtain large amounts of ETH and USDC from protocols such as Aave and dYdX. The hacker then used these funds to interact with the RouterProcessor2 contract and trigger the exploit.</li>



<li>Reentrancy attack – to repeatedly call the swap3callback function and drain funds from multiple victims in one transaction. This technique exploits a <a href="https://hacken.io/discover/reentrancy-attacks/">reentrancy vulnerability</a> in some smart contracts that do not prevent recursive calls.</li>
</ul>



<h2 class="wp-block-heading">The Heroes: White Hats Save The Day</h2>



At first, a 3rd-party security firm identified the hacker’s initial transactions, blocking a loss of 100 ETH. But after this ‘yoink’ attack, the hacker made a second attempt and succeeded. Sushi was already on its toes, so quickly called on <a href="https://coinweb.com/wiki/white-hat-computer-hacker/">white hat hackers</a> for rescue. 



On the day of the attack, the white hat community recovered <a href="https://twitter.com/jaredgrey/status/1645059641041121280">over 1,000 ETH</a> of the stolen funds:



<ul>
<li>300 ETH recovered by 0XCoffeBabe</li>



<li>700 ETH by Lido</li>



<li>At least 4 ETH across 600 addresses by Anish Agnihotri</li>
</ul>



Jared Grey, Sushi's Head Chef, acknowledged the error and advised users to revoke their approvals.



<h3 class="wp-block-heading">Sushi Reimbursement Plan</h3>



Just three days post-exploit, Sushi announced a reimbursement plan to calm its user base. They came up with a Merkle Claim contract that affected people could use to retrieve funds from the white hats’ addresses.&nbsp;



Even better: SushiSwap developed a tool to check for exposure across various networks, including Ethereum, Polygon, Avalanche, Arbitrum, Gnosis, Optimism, and others.



<h2 class="wp-block-heading">Market Reactions &amp; Consequences</h2>



The SUSHI token experienced a minor <a href="https://beincrypto.com/sushiswap-exploit-sushi-tanks-6/">6% drop</a> in the 24 hours after the exploit. The damage, fortunately, wasn't massive or widespread.



Users affected were either swiftly drained or had their <a href="https://twitter.com/geek_sg/status/1645048235860586496">permissions revoked</a>, and the heroic white hat efforts played a significant role in minimizing the PR fallout. Nevertheless, this incident remains a significant source of embarrassment for SushiSwap, and it appears that the drama isn't over yet.



Just a week before the hack, Jared Grey, SushiSwap's key figure, highlighted a substantial surge in volume for the DEX's cross-chain swap (xSwap). On top of that, Sushi’s DAO recently found itself in the <a href="https://forum.sushi.com/t/head-chef-jared-greys-official-sec-statement-faq/11918">crosshairs</a> of the U.S. SEC. The legal case is yet to play out.



<h2 class="wp-block-heading">Lessons Learned</h2>



Let's talk about the lessons learned from this SushiSwap hack. It underscores the critical importance of validating user-provided input. In this case, the failure to validate user-provided routes for RouteProcessor2 allowed the attacker to establish a malicious pool and take tokens from users who had granted approvals for RouteProcessor2.



Like many of the most significant <a href="https://coinweb.com/how-to-avoid-defi-crypto-scams/">DeFi hacks</a> we've seen, this attack took advantage of vulnerabilities in unaudited code. Therefore, prioritizing smart contract audits and penetration testing should be the go-to approach for most projects in the DeFi space.



On top of that, the active involvement of white hat hackers proved invaluable post-exploit. Hence, this case also proves the importance of engaging a broader community, including through <a href="https://hacken.io/services/bug-bounty/">bug bounties</a>, for your cybersecurity needs. Sushi provided a more modest bounty than the industry standard, but thankfully, passionate white hats quickly came to help.

SushiSwap DEX Hack Explained

TL;DR Date of Hack: July 30, 2023. Amount Lost: $69 million. Key Vulnerability: What was initially assumed as reentrancy turned out to be an inherent vulnerability in Vyper, a Pythonic programming language for Ethereum smart contracts used by Curve and other decentralized protocols.



<h2 class="wp-block-heading">What Happened</h2>



On July 30, 2023, Curve Finance – a popular DEX – fell victim to a <a href="https://hacken.io/discover/reentrancy-attacks/">reentrancy attack</a>. But the root cause was way deeper than most people, including Curve, initially assumed. There was a bug in the Vyper programming language, causing a malfunction in the reentry guard that <a href="https://www.chainalysis.com/blog/curve-finance-liquidity-pool-hack/">led to a theft of $69 million</a>.



The hack was initiated with $11.5M from the NFT lending protocol, JPEG'd's pETH-ETH pool. However, the attacker didn’t stop there:



<ul>
<li>JPEG’D lost $11.5M from the pETH/ETH pool</li>



<li>Alchemix lost $20.5M from the alETH/ETH pool</li>



<li>Metronome lost $1.6M from the msETH-ETH pool</li>



<li>And Curve itself lost $24.2M from the CRV/ETH pool</li>
</ul>



Meanwhile, another leading decentralized exchange, Ellipsis, reported a loss of $78,000 due to an attack on their BNB stable pools.



Around $69M was stolen; after all refunds, the total loss is about $20M.



<h2 class="wp-block-heading">The Ultimate Root Cause</h2>



Initially, Curve thought it was a "read-only reentrancy" issue that had plagued other protocols before. But the actual root cause was more fundamental. In this security breach, the root problem was a 0-day compiler bug in the older version of Vyper, which remained undetected until the attackers exploited it.



Vyper is a smart contract programming language tailored for the <a href="https://coinweb.com/wiki/ethereum-virtual-machine-evm/">Ethereum Virtual Machine (EVM)</a>. The vulnerability was found on Vyper’s versions 0.2.15, 0.2.16 and 0.3.0.



This bug causes a mismatch in storage slots and disrupts the non-reentrant protection. This vulnerability permits attackers to intervene in transactions between these functions, distort LP token prices, and drain the pool.



It has affected other projects like Conic Finance and EraLend earlier.



Here's what went wrong: The <a href="https://beincrypto.com/curve-finance-exploit-public-bounty-reward/">initial investigations</a> highlighted that the Vyper compiler did not correctly implement the reentrancy guard to lock the contract. As a result, two functions, "add_liquidity" and "remove_liquidity," had a mismatch in their storage.&nbsp;



As a result, the attackers could repeatedly insert transactions between these two functions, allowing them to manipulate LP token prices and deplete the pool of funds.



<h2 class="wp-block-heading">What Tools &amp; Techniques Were Used To Exploit Curve?</h2>



The hackers used a combination of tactics to exploit Curve.fi. Here's a breakdown:



<ul>
<li>Price manipulation with Vyper Compiler: Using the Vyper compiler vulnerability, the hackers altered stablecoin prices in pools like 3pool, sUSD, renBTC, and saave on Curve. They then traded these stablecoins for other tokens at inflated rates.</li>



<li>Flash loan: The hackers used flash loans that allow users to borrow cryptocurrency without providing collateral if they repay it in the same transaction. They borrowed over <a href="https://www.bloomberg.com/news/articles/2023-07-31/crypto-exchange-curve-sees-1-5-billion-flee-or-lost-after-hack-crv-token-drops#xj4y7vzkg">$100M worth of stablecoins from Aave</a>, a DeFi lending platform, to maximize the impact of their attack.</li>



<li>Anonymity: The hackers took measures to conceal their identity and evade tracking by law enforcement, using multiple wallets, mixing services, and DEXs. Plus, they returned some of the stolen funds to Curve to mitigate legal consequences.</li>
</ul>



<img style="" src="https://lh5.googleusercontent.com/IgS--qfcr99pDdTHs0meFRcfLKUoESlXnaqVze4tbsTWvCAfaa4OPj3Z6LUoVRZBYydns1nwXfUXKUTi9dPLtIoD1DXF8wBJ4V320UWci80unaLYwDRRkCQD-1UFC-mfygeQggTI4Zhy5JbH0Ymmehw" alt="Hackers used reentracy bug to exploit the smart contract.">



<h2 class="wp-block-heading">The Heroes</h2>



In a rare successful case, the white hat community was able to recover 70% of all losses. The heroes in this event were the <a href="https://chain.link/education-hub/maximal-extractable-value-mev#:~:text=What%20Is%20MEV%3F,during%20the%20block%20production%20process.">Miner Extractable Value (MEV)</a> bots and white hats from the ETH Security Community front-running the hackers' transactions. Only in crypto, right?



<a href="https://etherscan.io/address/0xc0ffeebabe5d496b2dde509f9fa189c25cf29671">C0ffeebabe.eth</a>, an MEV bot operator, was one such white hat who returned 2,879 ETH to hacked DEX using a maximal extractable value Ethereum-arbitrage trading bot to front-run the hackers. However, for the rest of the amount, the efforts continued. 



In a spirit of collaboration, Curve, Metronome, and Alchemix united on August 3. Their shared goal? To recover the remaining stolen funds.



They offered 10% ($7M) and promised to take no legal action if the full amount was to be returned by August 4. Surprisingly, the <a href="https://cointelegraph.com/news/curve-vyper-exploit-whole-story-so-far">hackers returned 4,820.55</a> Alchemix ETH (alETH) to the Alchemix Finance team and 1 ETH to the Curve.fi team by August 5.



On August 6, Curve Finance declared a reward of 10% to anyone who could identify the hackers. The reason? Firstly, the deadline for the hacker had passed and only 70% of the stolen funds were returned.



At the time of writing, factoring in all the refunds made, the total losses have now settled at $20M.



<figure class="wp-block-image is-style-default"><img src="https://lh5.googleusercontent.com/Xi4ujo7347e2oJr9TQypZncqmSsx7LtgYSEug1c8eTxXbEZ5eVHBixtIK1qdmoVbA-TWe0pvk04257cXkFVEkrwW1LVNdLxG45WSjRELt6HtIBG7XF8xvTKDY_N2vr3xZD0hNWf5d4dfw1plxztkXfw" alt="Visual chart"/><figcaption class="wp-element-caption">Source: <a href="https://www.chainalysis.com/blog/curve-finance-liquidity-pool-hack/">Chainalysis</a></figcaption></figure>



<h2 class="wp-block-heading">Consequences &amp; Reaction</h2>



The security incident stressed DeFi protocols, highlighting worries about its impact on the crypto market. This vulnerability could endanger all pools using Wrapped Ether (WETH).



The hack sent shockwaves through the DeFi community, causing many users to withdraw their funds from Curve and other Vyper-based protocols.&nbsp;



The total value locked in Curve plummeted by nearly half to $1.5 billion within a day of the hack.



As soon as news of the hacks spread, the <a href="https://rekt.news/curve-vyper-rekt/">CRV price dropped nearly 30%</a> following the hack, falling to a low of $0.48 amid fears that Egorov's collateralized loans would be liquidated.



This decline and the worry that the hackers might flood the market with their stolen CRV raised concerns about potential problems for other DeFi platforms.



One platform in particular, AAVE, faces the risk of debt because of a large borrowing position secured with CRV tokens, which is well-known to the public and managed by Egorov.



<h2 class="wp-block-heading">Post-Hack Security Measures &amp; Lessons Learned</h2>



Curve and other <a href="https://coinweb.com/wiki/protocol/">protocols</a> should not be blamed for the attack as it is quite hard to pinpoint where the blame lies. These compiler-level issues came as a surprise to all those involved.&nbsp;



Instead of targeting read-only reentrancy issues, the attackers went deeper, looking for a way into a more fundamental layer. Although this Vyper bug has caused hacks in the past,&nbsp; it still went unnoticed.



One effective way to avoid such hacks could be to audit both <a href="https://hacken.io/services/blockchain-security/smart-contract-security-audit/">audit projects' smart contracts</a> and the underlying <a href="https://hacken.io/discover/blockchain-architecture-layers/">blockchain architecture</a>. For instance, a <a href="https://hacken.io/services/blockchain-security/blockchain-protocol-security/">blockchain protocol audit</a> doesn't merely assume the stability of the underlying language; it rigorously tests it. This could have made a significant difference in Curve's scenario.



"It's not that Curve was easily attacked and no one noticed; the attack must have taken months and was one of the most complex ever seen in DeFi. Unfortunately, the blame goes to the Vyper dev partially and to the Curve developers for choosing Vyper and not Solidity at that specific moment." - Carlo Parisi, Smart Contract Auditor



<h3 class="wp-block-heading">What else could be done?</h3>



Compiler version. Ensure that your code uses the stable compiler version. They are usually better audited and refactored. While no guarantees exist, it's a crucial security practice to follow.



Comprehensive testing. Ensure thorough test coverage of the code to catch vulnerabilities before deployment. Proper testing decreases the possibility of future bugs.



Private mempools. Making it easier for white hats to recover stolen assets.



Responsible disclosure. This is a critical reminder for bug hunters. Refrain from prematurely revealing discovered vulnerabilities to prevent potential misuse by hackers and give users a chance to withdraw funds.

Curve Finance Liquidity Pools Hack Explained

<div class="wp-block-group">
TL;DR Date of Hack: September 4th, 2023 Entities Involved: Stake.com, potential North Korea-affiliated hackers. Amount Lost: $41M Key Vulnerability: Suspected compromise of Stake's hot wallet private keys.







On September 4th, the online crypto casino Stake.com faced a <a href="https://twitter.com/hackenclub/status/1698702065747316913">substantial security breach</a>, resulting in a staggering loss of around $41M from its hot wallets. This incident, while unfortunate, provides valuable insights into the intricacies of <a href="https://hacken.io/insights/blockchain-security-vulnerabilities/">blockchain security</a> and the ever-evolving tactics of crypto hackers.
</div>



<h2 class="wp-block-heading">Initial Indicators</h2>



This hack's swift and strategic nature suggests a potential compromise of Stake's hot wallet private keys. However, as of this writing, there hasn't been an official confirmation from Stake.com’s team regarding this.



<h2 class="wp-block-heading">Sequence of Attacks</h2>



Ethereum Network Breach



Within moments, a massive $15.7M was siphoned off from the Ethereum Network. The crypto assets targeted included:



<ul>
<li>6001 $ETH</li>



<li>3.9M $USDT</li>



<li>1.1 $USDC</li>



<li>900K $DAI</li>
</ul>



These were quickly funneled to hacker-controlled address <code>0x3130662aece32f05753d00a7b95c0444150bcd3c</code>, which subsequently distributed them to various Externally Owned Accounts (EOAs).



<figure class="wp-block-image"><img src="https://lh3.googleusercontent.com/i11xRZFKFrFa0Ael6UADA65l5GXsInkEmCG5qHNlfPDabIqkrPDSD5R_mb2kzi-zGevrqNSk6HxVanlEV7qSp3Fm-SzQhxGCfWJ_Xu9S18JAfA8_dtiAXP0qdh8vekwFR4dHv5T6BgK00P71HVA90n0" alt=""/></figure>



Binance Smart Chain &amp; Polygon Networks Breach



Roughly an hour later, the attacker struck again, this time targeting both the Binance Smart Chain and the Polygon Networks. A total of $25.2M in assets were drained:



From BSC:



<ul>
<li>12k $BNB</li>



<li>7.35M $BSC-USD</li>
</ul>



And others including 1.8M USDC, 2100 $ETH, 1.3M $BUSD, 83.9B $SHIB, 40K $LINK, and 300K $MATIC. All the assets were immediately sent to this address <code>0x4464e91002c63a623a8a218bd5dd1f041b61ec04</code> and distributed to different EOAs.



<figure class="wp-block-image"><img src="https://lh6.googleusercontent.com/mNOGsra4ntL1grbDzrL_uQcDUlMenKBVw6ygHcYnG03sdr-_1_zPyea6yEmiv1v1KKbWzKfiYBzEIbLRAQ7cNBUehOu-reW2MYPnert55jH9zkEI1sn_cj-0IaOfXq6Fjwlewiq4fNDxXqkQ6GuWgMI" alt=""/></figure>



From Polygon:



<ul>
<li>70K $DAI</li>



<li>4.22M $USDT</li>



<li>1.78M $USDC</li>



<li>3.25M $MATIC</li>
</ul>



The assets were sent to this address <code>0xfe3f568d58919b14aff72bd3f14e6f55bec6c4e0</code> and distributed between multiple accounts.



<figure class="wp-block-image"><img src="https://lh6.googleusercontent.com/CHsc0LjGW5odn_k-eVLzSJVy_EgiIhcgwydotaH3S6rm3IrulPTEQFxbkAsYBIQkP7ucZJDmESwl-gTbqKXGyaNoCWe4n34JxOv4vKMfHf6wCIqMTs5egLbmI7r1u7uWYXTlwFve49erKkeWYiF1vWU" alt=""/></figure>



<h2 class="wp-block-heading">Stake’s Response</h2>



Shockingly, it took five hours after the initial attack for the Stake.com team to <a href="https://twitter.com/Stake/status/1698746766076588057">acknowledge the breach publicly</a>, assuring users that their funds remained secure. Interestingly, a mere few hours prior, users were notified of a system maintenance.



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<h2 class="wp-block-heading">The Aftermath</h2>



Two days after the attack, the attacker commenced laundering the stolen assets, predominantly by bridging them from Polygon to Avalanche, eventually converting a substantial portion of MATIC to BTC. To date, 72 BTC have been laundered, with the remaining assets still seemingly in the attacker’s possession.



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<h2 class="wp-block-heading">A Potential North Korean Connection?</h2>



Recent <a href="https://www.fbi.gov/news/press-releases/fbi-identifies-lazarus-group-cyber-actors-as-responsible-for-theft-of-41-million-from-stakecom">information from the FBI</a> points towards a more sinister plot. The attack signatures and the addresses involved seem eerily similar to those seen in other significant 2023 hacks, including those of Alphapo, CoinsPaid, and Atomic Wallet. These hacks collectively resulted in losses surpassing $200M. Preliminary investigations suggest that North Korean hackers might be the culprits behind this series of high-profile breaches.



<a href="https://twitter.com/hackenclub">Follow @hackenclub on 𝕏 (Twitter)</a>



<h2 class="wp-block-heading">Conclusion</h2>



The Stake.com hack serves as a stark reminder of the evolving threats in the crypto domain. Continuous vigilance, robust security measures, and <a href="https://extractor.hacken.io/">proactive incident response mechanisms</a> are paramount in ensuring the safety of digital assets.

The Stake.com Hack Explained: Unpacking the $41M Crypto Breach

The crypto industry was shaken a bit on the 13th of March, 2023. An attacker exploited the Euler Finance protocol for a record-breaking $187 million <a href="https://hacken.io/discover/flash-loan-attacks/">flash-loan attack</a>.



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According to on-chain reports, the hacker stole $187 million from the Euler Finance protocol. So far, this tops the list of the biggest hacks in 2023. How did it happen?



<h2>Inside the Attack</h2>



The hacker created three contracts; a primary one, then two others for violation and liquidation. They got a flashloan of 30 million DAI from Aave, a flashloan protocol, and sent it to the violation contract.



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The hacker deposited 20 million DAI to Euler Protocol and got approximately 19.6 million eDAI in return. Then they leveraged the 19.6 million eDAI to borrow approximately 195.6 million eDAI and 200 million dDAI.



Recall that the hacker still has 10 million DAI left out of the 30 million DAI they borrowed. They used the remaining 10 million DAI to repay some of their debt. This was important because the Euler Finance smart contract checks the health score of borrowing accounts. Balance is now 190 million dDAI. Then they borrowed another 195.6 million eDAI and 200 million dDAI.&nbsp;



At this point, the hacker donated 100 million eDAI to the Euler protocol reserve. This call was successful because the donateToReserve function has no liquidity check. The liquidation call was successful, and the attacker got 254 million dDAI and 310 million eDAI. They repaid Aave its 30 million DAI and made about 8.7 million DAI from the exploit.



It didn’t end there. The attacker also used this address [00x47ac3527d02e6b9631c77fad1cdee7bfa77a8a7bfd4880dccbda5146ace4088f] to execute this same attack logic with WETH.&nbsp;



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The attacker's actions:



<ul><li>borrowed 20895 WETH flashloan from Aave</li><li>deposited 13930 WETH into the EToken pool</li><li>minted ETokens and received 13930 from the pool</li><li>paid 6965 WETH to improve health score</li><li>minted 13930 WETH and donated 69650 WETH</li><li>the liquidation contract received 28994 WETH</li><li>paid back Aave and took away 8099 ETH ($135,630,71)</li></ul>



<h2>What were the vulnerabilities?</h2>



After careful analysis, we discovered that the hacker exploited two vulnerabilities in the Euler Finance contract.



1. Lack of liquidity checks on the donateToReserves function. The donateToReserve function allows the users of Euler to deposit funds into the reserved address. Everyone who calls this function has both Debt Token (DToken) and Equity Token (EToken).



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The main vulnerability of this function is that it doesn’t check or confirm the liquidity status of the borrower. So the users can under-collateralize their leverage by donating their Equity Tokens to the reserve while their Debt Tokens remain unchanged. This creates a form of technical bad debt. So the hacker’s liquidation contract successfully withdrew from the protocol.



2. The Healthscore Flaw. Euler finance has a design for assigning health scores to accounts. It allows insolvent accounts to get the collateral without repaying the outstanding debt. This was spelled out in the computeLiqOpp function.



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The logic behind this code block is that seizing all the borrower’s collateral does not necessarily mean they will still be solvent. Hence, whatever collateral they have left should suffice. However, an attacker can exploit this logic by carrying out under-collateralized leverage.



<h2>How is the Euler Finance team handling the situation?</h2>



On the 14th of March, the Euler team issued a release on their Twitter account and mentioned their 3 action steps:



<ul><li>Stop the attack&nbsp;</li><li>Engage more ETH Security companies</li><li>Involve the law enforcement agencies</li><li>Possibly negotiate with the hacker</li></ul>



<h2>Lessons Learned from the Attack</h2>



While the Euler team is trying to recover from the attack, there are a few lessons from this exploit:



Test thoroughly. On a closer look, the donateToReserve function was not properly tested. As seen on their <a href="https://github.com/euler-xyz/euler-contracts/blob/85abe8d0986f97557159d26c5e79df6d78eccc53/test/reservesDonate.js">GitHub</a>, It was not tested for donating after borrowing and health score after donating. The team could have mitigated this attack if they had tested the vulnerable function against every possible scenario. This is more critical when new logic and functions are introduced to an existing codebase. As in the case of the donateToReserve function, test new improvements in the smart contract.



Audit more rigorously. <a href="https://docs.euler.finance/security/audits">Six Web3 security companies</a> had audited Euler Finance, yet this attack occurred. It's fair to say that not all audits reviewed the faulty function. Still, some audits are not done deeply and can leave out of scope important functions, so it's better to have a comprehensive audit.



Request a <a href="https://hacken.io/services/blockchain-security/smart-contract-security-audit/">Smart Contract Audit</a> that makes a difference.&nbsp;

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