View source for Deus Finance (DEI Stablecoin) Burn Vulnerability

{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/deusfinancedeistablecoinburnvulnerability.php}}[[File:Deistablecoin.jpg|thumb|DEI Stablecoin]]

== About Deus Finance ==
<ref name="coingecko-9359" /><ref name="deusfinance-9358" /><ref name="deusfinancedocs-10933" /><ref name="deifinanceapp-9357" />

"Deus Finance. Universal access to institutional-grade blockchain derivatives. Providing the framework for optimistic on-chain digital derivatives. Capital efficiency, cross-margin between exchanges and market makers, in addition to instant settlement, enables DEUS to offer an unparalleled alternative to TradFi."

"DEUS Finance is building an infrastructure layer for peer-to-peer, on-chain derivatives. DEUS v3 utilizes bilateral agreements, meaning both parties lock collateral into a trade, with every trade isolated, and settlements automated."

"DEUS connects traders and counterparties directly. Instead of the common LP-centric models, where liquidity providers take on the systemic risk, DEUS isolates risk per trade between the two parties. DEUS is currently primarily (majority of the liquidity) on the Fantom network, however, DEUS v3 can and will be deployed on multiple chains."

"The DEUS ecosystem has two tokens, $DEUS and $xDEUS, and an algorithmic stablecoin, $DEI." "Users interacting with this software do so entirely at their own risk"

DEI is "The global settlement currency of DEUS's Decentralized FIX" "Traders using DEI will enjoy better fee structures while trading derivatives on DEUS v3."

"DEI is an fractional reserve stablecoin, forked and inspired by frax.finance and can be used as a unit of account for derivative-based trading on protocols built on the DEUS infrastructure layer. Traders, Protocols and Market Makers utilizing and offering trading via DEUS v3 using $DEI as stablecoin will enjoy better Fee Structures, than when using $USDC."

"DEI has a 100% minting ratio and 9% seignorage. 100% USDC is required to mint $DEI (ie. $1 USDC is required to mint 1 $DEI). On mint, 9% is used to buy back $DEUS and deposited into the DEI redemption contract. On redemption, 9% is transferred out of the redemption contract. This figure adjusts constantly and can be viewed in the minter stats."


This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

* Known history of when and how the service was started.
* What problems does the company or service claim to solve?
* What marketing materials were used by the firm or business?
* Audits performed, and excerpts that may have been included.
* Business registration documents shown (fake or legitimate).
* How were people recruited to participate?
* Public warnings and announcements prior to the event.

Don't Include:
* Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
* Anything that wasn't reasonably knowable at the time of the event.
There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

== The Reality ==
This sections is included if a case involved deception or information that was unknown at the time. Examples include:

* When the service was actually started (if different than the "official story").
* Who actually ran a service and their own personal history.
* How the service was structured behind the scenes. (For example, there was no "trading bot".)
* Details of what audits reported and how vulnerabilities were missed during auditing.

== What Happened ==
A small typo crept into the DEI smart contract as part of a routine upgrade. This allowed an attacker to drain funds from the smart contract. The vulnerability existed on three different blockchains, and was thus exploited three times by different actors.
{| class="wikitable"
|+Key Event Timeline - Deus Finance (DEI Stablecoin) Burn Vulnerability
!Date
!Event
!Description
|-
|Apr 10th, 2023
|DEI Token Smart Contract Upgraded
|The DEI token smart contract is updated on the BSC network<ref name="peckshieldtwitter-10928" />.
|-
|May 5th, 2023 11:52:45 AM MDT
|Exploit on Arbitrum
|The exploit occured on the arbitrum chain<ref name="arbiscan-10921" /><ref name="arbiscan-10922" />.
|-
|May 5th, 2023 11:53:35 AM MDT
|Exploit on Binance Smart Chain
|The exploit occured on the Binance smart chain<ref name="bscscan-10925" />. This is reportedly by a white hacker<ref name="peckshieldtwitter-10928" />. They reportedly paid a fee of 2.14321709105314 BNB.
|-
|May 5th, 2023 12:35:00 PM MDT
|Hippo Potato Sounds the Alarm
|The Twitter user Hippo Potato sounds the alarm on Twitter<ref name="hippopotatotwitter-10932" />.
|-
|May 5th, 2023 12:47:00 PM MDT
|AdamB Posts About Exploit
|Twitter AdamB spreads the word further that there is free money to be made due to a "basic implementation error"<ref name="adamb83024264twitter-10918" />. The arbitrum transaction<ref name="arbiscan-10922" /> is provided.
|-
|May 5th, 2023 12:53:35 PM MDT
|Exploit on Ethereum
|The exploit occurred on the ethereum chain, which results in a transfer of 62,287.333509816711554912 DEI tokens to an exploiter<ref name="etherscan-10927" /><ref name="etherscan-10926" />.
|-
|May 5th, 2023 1:58:00 PM MDT
|Marco Paladin Return Funds Tweet
|Twitter user Marco Paladin reports that he's returning funds to DeusDao and requests for confirmation of the authenticity of the mutlisig wallet<ref name=":1">[https://twitter.com/paladin_marco/status/1654576290387640320 Marco Paladin - "Returning some whitehatted funds to @DeusDao. Can people confirm authenticity of their multisig?" - Twitter] (May 29, 2023)</ref>.
|-
|May 5th, 2023 3:03:00 PM MDT
|ProtoSec Publishes Analysis
|0xProtosec publishes an analysis of the exploit on Twitter<ref name="0xprotosectwitter-10920" />.
|-
|May 5th, 2023 3:53:00 PM MDT
|Zellic Publishes Analysis
|Zellic publishes a more detailed analysis of the exploit<ref name="zelliciotwitter-10919" />.
|-
|May 5th, 2023 4:12:00 PM MDT
|Marco Paladin Analysis
|Marco Paladin reports on the failure that the DeusDao "[g]uys nverted msg.sender and owner in the approval on `burnFrom` allowing anyone to burn anyone's funds and also steal them."<ref name=":2">[https://twitter.com/paladin_marco/status/1654610130313281539 Marco Paladin - "Guys inverted msg.sender and owner in the approval on `burnFrom` allowing anyone to burn anyone's funds and also steal them." - Twitter] (May 29, 2023)</ref>
|-
|May 5th, 2023 4:32:00 PM MDT
|Public Tweet By DeusDAO Team
|The DeusDAO team acknowledges the attack on Twitter<ref name="deusdaotwitter-10929" /><ref name="deusdaotwitter-10930" />, requests that any white hat hackers send rescued funds to the DeusDAO multi-sig<ref>[https://twitter.com/DeusDao/status/1654614967084101633 DeusDao - "For all white hackers that were able to rescue funds during the DEI exploit from today 05/05/2023 We are confirming ... a DEUS team owned multisig on Arbitrum. Please get in touch with us if you have not already." - Twitter] (May 29, 2023)</ref>, and requests that users hold off on interacting with their smart contract for the time being<ref name="deusdaotwitter-10931" />. TBD expand and move to other sections.
|-
|May 5th, 2023 4:52:29 PM MDT
|BSC Tokens Transfered
|The exploited tokens are transferred to a different wallet address<ref>[https://bscscan.com/tx/0xbc8d70621770eafee88cb85793332bc5cce392e4348a2c2bcfb746255a6c4b64 Binance Smart Chain Exploit Token Transfer Transaction - BSCScan] (May 9, 2023)</ref><ref name="bscscan-10924" />. This is reportedly by a white hacker<ref name="peckshieldtwitter-10928" />.
|-
|May 5th, 2023 5:18:00 PM MDT
|Peckshield Reports A Pubic Burn
|Blockchain researchers at Peckshield report a "pubic" burn vulnerability and note the total losses at $1.3m in BSC alone. They note that the BSC funds were front-run by a white hacker and that the ARB/ETH deployments are also affected<ref name="peckshieldtwitter-10928" />.
|-
|May 5th, 2023 5:31:00 PM MDT
|PeckShield Reports Arbitrum Losses
|Peckshield reports on losses exceeding $5m on the Arbitrum network, along with the related transaction<ref name=":0">[https://twitter.com/peckshield/status/1654629906637291520 <nowiki>PeckShield - "The arbitrum deployment was hacked [with a] loss [exceeding] $5m [USD] and here is the related t[ransaction]" - Twitter</nowiki>] (May 9, 2023)</ref>.
|-
|May 5th, 2023 8:14:12 PM MDT
|BSC Tokens Transfered
|The BSC DEI is transferred again from the second wallet address<ref name="bscscan-10924" /> to another wallet address<ref>[https://bscscan.com/tx/0x6be1cd70eaeb0ea21a5f4fa912fab07b6dce0037aa1f215596f1c6f175818547 BSC Exploit Tokens Transferred - BSCScan] (May 9, 2023)</ref>.
|-
|May 5th, 2023 9:24:00 PM MDT
|MetaSleuth Publishes Analysis
|MetaSleuth publishes an analysis on Twitter, reporting that the tokens have been traced to Binance and TornadoCash<ref name="metasleuthtwitter-10923" />.
|-
|May 6th, 2023 12:47:00 PM MDT
|Rekt Publishes Article
|Rekt publishes an article on the exploit<ref>[https://twitter.com/RektHQ/status/1654920889027231747 RektHQ - "It’s a hat trick for @DeusDao. Token holders lost a total of ~$6.5M and DEI depegged by over 80%." - Twitter] (May 16, 2023)</ref><ref name="rektnews-10917" />.
|}

== Technical Details ==
This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Exploiter address on Arbiscan: <ref name="arbiscan-10921" />

"A simple implementation error was introduced into the DEI token contract, in an upgrade last month. The burnFrom function was misconfigured, with the ‘_allowances’ parameters ‘msgSender’ and ‘account’ written into the contract in the wrong order.

This created a public (or pubic, according to Peckshield) burn vulnerability, which an attacker is then able to manipulate and gain control of DEI holders’ approvals and transfer assets directly to their own address.

The mis-ordered parameters allow the attacker to set a large token approval for any DEI holder’s address. Then, by burning 0 tokens from the address, the approval is updated to the attacker’s address, who can drain the holder’s funds."

=== Marco Paladin Analysis ===
Marco Paladin reported some analysis with his tweet to return the funds<ref name=":1" /><ref name=":2" />.<blockquote>Guys inverted msg.sender and owner in the approval on `burnFrom` allowing anyone to burn anyone's funds and also steal them.</blockquote>

=== ProtoSec Analysis ===
0xProtosec was one of the first to publish a technical analysis of the exploit<ref name="0xprotosectwitter-10920" />.<blockquote>Problem: currentAllowance should be = _allowances[account][_msgSender()].

Process: I can approve max value to `account` and call this function with 0 as burn amount.

Result: 0 tokens are burnt and I am approved `currentAllowance` amount of account's tokens. I transfer them all</blockquote>

=== Zellic Analysis ===
Zellic published a more detailed analysis, attributing the problem to the burnFrom function<ref name="zelliciotwitter-10919" />.<blockquote>First, there is a large approval. It's not important now, so we will get back to it later.

Instead, the crux of the issue lies in the burnFrom function:

At a first glance, the burnFrom function looks fine. But don't let your eyes deceive you—there's a critical issue lingering here.

In ERC20, allowances are mapped as _allowances[owner][spender]. But here, the it reads from _allowances[attacker][victim]. The order is flipped!

With the flipped ordering, the attacker is able to approve the victim but then use their own approval to burn victim's tokens. But it doesn't end just at the burn function...

The remaining approval (allowance - amount) is written back to [victim][attacker].

This is why the attacker did a burnFrom(victim, 0).

This resets the allowance to the corrupted value!

What's left is to just call transferFrom, and steal all of the victim's balance. And that's exactly what the attacker did.

This bug is so simple, yet so easy to make.</blockquote>

=== PeckShield Analysis ===
PeckShield published an analysis of the exploit on Twitter<ref name="peckshieldtwitter-10928" /><ref name=":0" />.<blockquote>Hi @DeusDao: it appears to be a pubic burn vulnerability with loss > $1.3M alone at BSC. The ARB/ETH deployments are also affected.

The BSC hack was successfully frontrun by a bot.

The DEI token @ BSC was upgraded  on Apr-10-2023

The arbitrum deployment was hacked w/ loss > $5m.</blockquote>

=== MetaSleuth Analysis ===
Technical details on tracing some of the funds were completed by MetaSleuth<ref name="metasleuthtwitter-10923" /><ref name=":3">[https://twitter.com/MetaSleuth/status/1654688529434415105 MetaSleuth - "On Arb, the exploiter made a profit of over $5M. The initial funds was obtained from TC on BSC. The exploiter swapped most of the profits for 2529 ETH." - Twitter] (May 29, 2023)</ref><ref name=":4">[https://twitter.com/MetaSleuth/status/1654688531758071808 MetaSleuth - On BSC, the total profit amounts to around 1.3 million USD. Exploiter 4 obtained the initial funds from Binance." - Twitter] (May 29, 2023)</ref>.<blockquote>1) On Arb, the exploiter made a profit of over $5M. The initial funds was obtained from TC on BSC. The exploiter swapped most of the profits for 2529 ETH. Besides, they bridged 10k USDC to BSC via @MultichainOrg. Then the exploiter swapped all USDC for ETH and bridged it to ETH.

2) On BSC, the total profit amounts to around 1.3 million USD. Exploiter 4 obtained the initial funds from Binance. All the profits were transferred to exploiter 6 (0xdf61), then converted into DAI and remained at this address.

3) On ETH, the total profit is approximately 135,000 USD. The exploiter swapped all the profits for Ether but has not made the transfer yet.</blockquote><blockquote></blockquote>

== Total Amount Lost ==
The DEI smart contract losses were spread between three different blockchains due to the same contract and upgrade being deployed on each chain.

=== Arbitrum Losses ===
The losses on Arbitrum were reported as $5m USD by MetaSleuth<ref name="metasleuthtwitter-10923" /><ref name=":3" />. PeckShield reported that the loss exceeded $5m USD<ref name=":0" />.

=== BSC Losses ===
The losses on the BSC smart contract were reported as $1.3m USD by MetaSleuth<ref name="metasleuthtwitter-10923" /><ref name=":4" />. PeckShield that the loss exceeded $1.3m USD<ref name="peckshieldtwitter-10928" />.

=== Ethereum Losses ===
The losses on the Ethereum smart contract were reported as $135k by MetaSleuth<ref>[https://twitter.com/MetaSleuth/status/1654688534190780416 MetaSleuth - "On ETH, the total profit is approximately 135,000 USD. The exploiter swapped all the profits for Ether but has not made the transfer yet." - Twitter] (May 29, 2023)</ref>.


"According to BlockSec’s MetaSleuth, the losses were approximately $5M on Arbitrum, $1.3M on BSC and $135k on Ethereum." "Token holders lost a total of ~$6.5M on Arbitrum, BSC and Etherum, and the DEI stablecoin depegged over 80%."

<ref name="etherscan-10927" />

Ethereum exploiter address: 0x189cf534de3097c08b6beaf6eb2b9179dab122d1<ref name="etherscan-10926" />

Arbitrum exploiter address: 0x189cf534de3097c08b6beaf6eb2b9179dab122d1<ref name="arbiscan-10921" />

Binance (BSC) white hack exploiter transaction: 0xde2c8718a9efd8db0eaf9d8141089a22a89bca7d1415d04c05ba107dc1a190c3<ref name="bscscan-10925" /> and address 0x08e80ecb146dc0b835cf3d6c48da97556998f599<ref>[https://bscscan.com/tokentxns?a=0x08e80ecb146dc0b835cf3d6c48da97556998f599 Token Transactions of White Hack Exploiter - BSCScan] (May 9, 2023)</ref>.<ref name="bscscan-10924" />

The total amount lost has been estimated at $6,500,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

== Immediate Reactions ==
There were numerous reactions to the events as they unfolded.

=== Marco Paladin Returning Funds ===
Marco Paladin from Paladin Security prepared to return the whitehatted funds and requested confirmation of the multisig wallet<ref name=":1" />.<blockquote>Returning some whitehatted funds to @DeusDao. Can people confirm authenticity of their multisig?</blockquote>

=== DeusDao Announcement Tweet ===
The DeusDao team tweeted about the incident, requesting the return of any white-hack funds and promising a post-mortem<ref name="deusdaotwitter-10929" /><ref name="deusdaotwitter-10930" /><ref name="deusdaotwitter-10931" />.<blockquote>For all white hackers that were able to rescue funds during the DEI exploit from today 05/05/2023 We are confirming 0x7f5ae1dc8d2b5d599409c57978d21cf596d37996 As a DEUS team owned multisig on Arbitrum. Please get in touch with us if you have not already.

With the help of whitehats and partner projects, the DEUS team paused related contracts and burnt DEI to prevent further damage.

We will follow up with a Post Mortem and formulate a recovery plan in the upcoming days. Until then, we ask you to stay patient and not interact with any DEI contracts.</blockquote>

=== Third Party Analyses ===
Multiple analyses were prepared from prominent blockchain researchers including Protosec, Zellic, MetaSleuth, and PeckShield.

=== Twitter Community Reaction ===
Twitter user Charles Paladin tweeted to ask the DeusDao team why they didn't get the smart contract upgrade audited<ref>[https://twitter.com/PaladinCharles/status/1654647606432133120 Charles Paladin - "I have a serious question right now: why did you not get this upgrade audited? I’m not trying to judge anyone here, I’m just trying to understand it …" - Twitter] (May 29, 2023)</ref>.<blockquote>I have a serious question right now: why did you not get this upgrade audited? I’m not trying to judge anyone here, I’m just trying to understand it …</blockquote>How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

== Ultimate Outcome ==


What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

"An official update mentions a recovery plan for users who lost out in the exploit, and Deus have reached out to the attacker on-chain.

But given the account was originally funded via Tornado Cash on BSC, it’s not looking good."

"Luckily, the exploit on BSC was frontrun, and an on-chain message to the Deus Deployer shows the intent to return the funds. Other whitehats also sprang into action, and over $600k in USDC has so far been returned to a recovery multisig."

"For all white hackers that were able to rescue funds during the DEI exploit from today 05/05/2023
We are confirming 0x7f5ae1dc8d2b5d599409c57978d21cf596d37996
As a DEUS team owned multisig on Arbitrum. Please get in touch with us if you have not already."

== Total Amount Recovered ==
Arbitrum funds appear to have been recovered.

The total amount recovered is unknown.

What funds were recovered? What funds were reimbursed for those affected users?

== Ongoing Developments ==
What parts of this case are still remaining to be concluded?
== Individual Prevention Policies ==
{{Prevention:Individual:Avoid Using Smart Contracts}}

{{Prevention:Individuals:End}}

== Platform Prevention Policies ==
{{Prevention:Platforms:Regular Audit Procedures}}

{{Prevention:Platforms:End}}

== Regulatory Prevention Policies ==
{{Prevention:Regulators:Platform Security Assessments}}

{{Prevention:Regulators:End}}

== References ==
<references>
<ref name="rektnews-10917">[https://rekt.news/deus-dao-r3kt/ Rekt - Deus DAO - R3KT] (May 8, 2023)</ref>
<ref name="adamb83024264twitter-10918">[https://twitter.com/adamb83024264/status/1654558408803250176 adamb83024264 - "DEI has been exploited on Arbitrum, possibility other networks too. The root cause is a basic implementation error in the token contract." - Twitter] (May 8, 2023)</ref>
<ref name="zelliciotwitter-10919">[https://twitter.com/zellic_io/status/1654605171333423104 Zellic - "$DEI was exploited on Arbitrum just a few hours ago. It was a simple, yet hidden bug that caused a loss of $5,000,000." - Twitter] (May 8, 2023)</ref>
<ref name="0xprotosectwitter-10920">[https://twitter.com/0xProtosec/status/1654592710546960385 0xProtosec - "Result: 0 tokens are burnt and I am approved `currentAllowance` amount of account's tokens. I transfer them all" - Twitter] (May 8, 2023)</ref>
<ref name="arbiscan-10921">[https://arbiscan.io/address/0x189cf534de3097c08b6beaf6eb2b9179dab122d1 Deus DEI Exploiter - Arbiscan] (May 8, 2023)</ref>
<ref name="arbiscan-10922">[https://arbiscan.io/tx/0xb1141785b7b94eb37c39c37f0272744c6e79ca1517529fec3f4af59d4c3c37ef Arbitrum Exploit Transaction - Arbiscan] (May 8, 2023)</ref>
<ref name="metasleuthtwitter-10923">[https://twitter.com/MetaSleuth/status/1654688526095745024 MetaSleuth - "DEI has been exploited on Arbitrum, BSC, and ETH, resulting in a total loss of approximately 6.5 million USD. The initial funds have been traced back to @TornadoCash and @binance." - Twitter] (May 8, 2023)</ref>
<ref name="bscscan-10924">[https://bscscan.com/address/0x5a647e376d3835b8f941c143af3eb3ddf286c474 BSC Whitehack Address - BscScan] (May 8, 2023)</ref>
<ref name="bscscan-10925">[https://bscscan.com/tx/0xde2c8718a9efd8db0eaf9d8141089a22a89bca7d1415d04c05ba107dc1a190c3 Binance Exploit Transaction - BscScan] (May 8, 2023)</ref>
<ref name="etherscan-10926">[https://etherscan.io/address/0x189cf534de3097c08b6beaf6eb2b9179dab122d1 Deus DEI Exploiter Address - Etherscan] (May 8, 2023)</ref>
<ref name="etherscan-10927">[https://etherscan.io/tx/0x6129dd42778345bc278822a7feadeacb933f5e56ce51114e686832ad239307a8 Ethereum Exploit Transaction For 62,287.333509816711554912 DEI - Etherscan] (May 8, 2023)</ref>
<ref name="peckshieldtwitter-10928">[https://twitter.com/peckshield/status/1654626667787321344 peckshield - "Hi @DeusDao: it appears to be a pubic burn vulnerability with loss > $1.3M alone at BSC. The ARB/ETH deployments are also affected." - Twitter] (May 8, 2023)</ref>
<ref name="deusdaotwitter-10929">[https://twitter.com/DeusDao/status/1654614967084101633 DeusDao - "For all white hackers that were able to rescue funds during the DEI exploit from today" - Twitter] (May 8, 2023)</ref>
<ref name="deusdaotwitter-10930">[https://twitter.com/DeusDao/status/1654614968740851715 DeusDao - "With the help of whitehats and partner projects, the DEUS team paused related contracts and burnt DEI to prevent further damage." - Twitter] (May 8, 2023)</ref>
<ref name="deusdaotwitter-10931">[https://twitter.com/DeusDao/status/1654614970141753347 DeusDao - "We will follow up with a Post Mortem and formulate a recovery plan in the upcoming days." - Twitter] (May 8, 2023)</ref>
<ref name="hippopotatotwitter-10932">[https://twitter.com/hippo_potato/status/1654555505854152704 Hippo Potato - "DEI/USDC LP on Chronos exploited, do not deposit." - Twitter] (May 8, 2023)</ref>
<ref name="coingecko-9359">https://www.coingecko.com/en/coins/dei-token (Oct 26, 2022)</ref>
<ref name="deusfinance-9358">https://deus.finance/ (Oct 26, 2022)</ref>
<ref name="deusfinancedocs-10933">[https://docs.deus.finance/getting-started/new-to-deus New to DEUS? - DEUS Finance Gitbook] (May 8, 2023)</ref>
<ref name="deifinanceapp-9357">https://app.dei.finance/dashboard (Oct 26, 2022)</ref>
</references>