View source for LendfMe (DForce) DeFi Protocol Breached

{{Imported Case Study 2|source=https://www.quadrigainitiative.com/casestudy/dforcelendfmedefiprotocolbreached.php}}
{{Unattributed Sources}}

[[File:Lendfme.jpg|thumb|Dforce/LendFMe]]This is another exploit where one contract is run within another, enabling balances to be reduced before they are checked. This exploit was known since July of 2019, and never patched or investigated. It's part of the illustration of why smart contracts still have risks and exploits associated. In this case, we are lucky because the hacker gave the funds back after their identity was revealed through accidentally exposing their IP address.

This is a global/international case not involving a specific country.<ref name="coinspeaker-313" /><ref name="cryptopotato-320" /><ref name="cointelegraph-321" /><ref name="wooparadogtwitter-322" /><ref name="zdnet-315" /><ref name="github-316" /><ref name="imtokenmedium-323" /><ref name="coindesk-324" /><ref name="rewkangtwitter-325" /><ref name="cryptobriefing-825" /><ref name="ciphertrace-1152" /><ref name="zycrypto-1342" /><ref name="slowmisthacked-678" /><ref name="openzeppelinforum-1155" /><ref name="peckshieldmedium-1556" /><ref name="dforcenettwitter-1557" /><ref name="reddit-1558" /><ref name="dforcenetmedium-1559" /><ref name="dforcenetmedium-1560" /><ref name="dforcenetmedium-1561" /><ref name="dforcenetmedium-1562" /><ref name="zhuanlan-1563" /><ref name="lendfmegithub-1564" /><ref name="coingeek-1565" /><ref name="decrypt-1566" /><ref name="hackernoon-1567" /><ref name="certik-1776" /><ref name="cryptosec-5385" /><ref name="theblockcrypto-5436" /><ref name="carnegieendowment-9983" /><ref name="unnamed-12199" />

== About Dforce/LendFMe ==

"dForce is an integrated and interoperable platform of opening finance protocols, building a full stack DeFi protocols and creating an interconnected, interdependent protocol ecosystem." "Unlike most DeFi platforms focusing on a specific feature, dForce presents a full stack of DeFi protocols covering stablecoins, lending markets, derivative markets, liquidity protocol and oracles etc. We believe that stable-assets and financial protocols are inter-connected and should be interoperable with strong synergies. dForce centers around providing a variety of use cases for stable-assets, allowing them to transact across the network with increased liquidity stickiness and solidified network effect, and ultimately, growth potential will be captured by the dForce token (DF)."

"The wait is over! dForce is thrilled to announce our support for bringing BTC into our DeFi lending platform and the first move is to support imBTC in Lendf.Me."

"[A l]eading Chinese DeFi protocol has lost 99.95% of locked funds." "DForce DeFi Protocol was recently hacked and up to $25 million of customers’ crypto in Bitcoin and Ethereum was lost due to an entirely-known exploit that exists on an ETH token." "Compound CEO Robert Leshner claimed the attacker seized the full total." "Mindao Yang, the CEO of dForce, confirmed the attack on the project’s Telegram channel" "[T]he total value locked (in USD) in dForce, was reduced from around $25 million to almost nothing in a matter of hours." "DeFi Rate said that the vulnerability is not new since it resembles the 2016 attack on The DAO." "dForce has remained conspicuously quiet about the hacking on all their social medial channels." "On-chain data reveals that the attacker has transferred the assets to two other platforms, namely, Compound and Aave." "Returning the money to the owners is challenging since Aave is a decentralized finance platform." "The attack is believed to have targeted a vulnerability inherent to Ethereum’s (ETH) ERC-777 token standard." "DForce’s devastating attack comes less than one week after crypto venture capital firm, Multicoin Capital, announced it had led the DeFi protocol’s $1.5 million seed round." "According to investigators, hackers appear to have chained together bugs and legitimate features from different blockchain technologies to orchestrate a sophisticated "reentrancy attack."" "[T]he combination of using ERC777 tokens and Uniswap/Lendf.Me contracts enables [...] reentrancy attacks," "[Hackers] used the exploit against Uniswap first, and then used it again the next day against Lendf.me, with better results, draining about 99.5% of the platform's funds in the process."

"[DForce] learned of the attack at 9:15 am (UTC+8) through our internal monitoring system. Immediately following, we temporarily paused Lendf.Me and USDx and pulled down the website to investigate the attack and assess the situation."

"The hacker(s) attempted to contact [DForce]." "[DForce] contacted law enforcement in several jurisdictions, reached out to asset issuers and exchanges to track down and blacklist the hacker(s)’s addresses, and engaged [their] legal teams."

"Hackers have returned the stolen funds after leaking their IP address during the attack." "Over 90% of assets have been distributed to users in less than 24 hours. 100% users have been made whole in the recovery."

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 ==
The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.
{| class="wikitable"
|+Key Event Timeline - LendfMe (DForce) DeFi Protocol Breached
!Date
!Event
!Description
|-
|April 19th, 2020
|Main Event
|Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.
|-
|
|
|
|}

== 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?

== Total Amount Lost ==
The total amount lost has been estimated at $25,000,000 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 ==
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?

== Total Amount Recovered ==
The total amount recovered has been estimated at $25,000,000 USD.

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?
== General Prevention Policies ==
This type of attack can be mitigated through hot wallet insurance. An exchange would make sure that they either have cold storage balances to cover a full breach of any smart contracts, or comprehensive insurance to protect investors.
== Individual Prevention Policies ==
{{Prevention:Individuals:Placeholder}}

{{Prevention:Individuals:End}}

== Platform Prevention Policies ==
{{Prevention:Platforms:Placeholder}}

{{Prevention:Platforms:End}}

== Regulatory Prevention Policies ==
{{Prevention:Regulators:Placeholder}}

{{Prevention:Regulators:End}}

== References ==
<references><ref name="coinspeaker-313">[https://www.coinspeaker.com/dforce-defi-protocol-breached/ DForce DeFi Protocol Breached, $25 Million in BTC and ETH Lost] (Jun 10, 2020)</ref>

<ref name="cryptopotato-320">[https://cryptopotato.com/chinese-defi-protocol-dforce-reportedly-loses-25-million-of-its-total-locked-value-in-an-attack/ Chinese DeFi Protocol dForce Reportedly Loses $25 Million Of Its Total Locked Value In An Attack] (Jun 11, 2020)</ref>

<ref name="cointelegraph-321">[https://cointelegraph.com/news/dforce-loses-9995-of-funds-in-latest-test-of-defi-resilience DForce Loses 99.95% of Funds in Latest Test of DeFi's Resilience] (Jun 20, 2020)</ref>

<ref name="wooparadogtwitter-322">[https://twitter.com/WooParadog/status/1251714612791324673 WooParadog on Twitter: "@Rewkang @tomhschmidt This is the same exploit, hacker...] (Jun 21, 2020)</ref>

<ref name="zdnet-315">[https://www.zdnet.com/article/hackers-steal-25-million-worth-of-cryptocurrency-from-uniswap-and-lendf-me/ Hackers steal $25 million worth of cryptocurrency from Lendf.me platform | ZDNet] (Jun 21, 2020)</ref>

<ref name="github-316">[https://github.com/OpenZeppelin/exploit-uniswap GitHub - OpenZeppelin/exploit-uniswap: Exploiting a Uniswap exchange that uses an ERC777 token by leveraging the reentrant microtrading attack vector] (Jun 21, 2020)</ref>

<ref name="imtokenmedium-323">[https://medium.com/imtoken/dforce-brings-imbtc-to-defi-lending-c739b5cc0643 dForce brings imBTC to DeFi Lending] (Jun 21, 2020)</ref>

<ref name="coindesk-324">[https://www.coindesk.com/attacker-drains-decentralized-protocol-dforce-of-25m-in-weekend-attack Weekend Attack Drains Decentralized Protocol dForce of $25M in Crypto - CoinDesk] (Jun 21, 2020)</ref>

<ref name="rewkangtwitter-325">[https://twitter.com/Rewkang/status/1251707230040150018 Andrew Kang on Twitter: "@dForcenet’s @LendfMe $20M money market pool currently under attack] (Jun 21, 2020)</ref>

<ref name="cryptobriefing-825">[https://cryptobriefing.com/50-million-lost-the-top-19-defi-cryptocurrency-hacks-2020/ Millions Lost: The Top 19 DeFi Cryptocurrency Hacks of 2020 | Crypto Briefing] (May 22, 2021)</ref>

<ref name="ciphertrace-1152">[https://ciphertrace.com/wp-content/uploads/2021/01/CipherTrace-Cryptocurrency-Crime-and-Anti-Money-Laundering-Report-012821.pdf CipherTrace Cryptocurrency Crime and Anti-Money Laundering Report 2020] (Jun 20, 2021)</ref>

<ref name="zycrypto-1342">[https://zycrypto.com/crypto-whale-warns-of-growing-defi-scams-as-another-protocol-exits-market-with-funds-worth-20m/ Crypto Whale Warns Of Growing DeFi Scams As Another Protocol Exits Market With Funds Worth $20M ⋆ ZyCrypto] (Jun 13, 2021)</ref>

<ref name="slowmisthacked-678">[https://hacked.slowmist.io/en/?c=ETH%20DApp SlowMist Hacked - SlowMist Zone] (May 18, 2021)</ref>

<ref name="openzeppelinforum-1155">[https://forum.openzeppelin.com/t/list-of-ethereum-smart-contracts-post-mortems/1191 List of Ethereum Smart Contracts Post-Mortems - Security - OpenZeppelin Community] (Jun 23, 2021)</ref>

<ref name="peckshieldmedium-1556">[https://peckshield.medium.com/uniswap-lendf-me-hacks-root-cause-and-loss-analysis-50f3263dcc09 Uniswap Lendf Me Hacks Root Cause And Loss Analysis] (Jun 22, 2021)</ref>

<ref name="dforcenettwitter-1557">[https://twitter.com/dForcenet/status/1254738662039752704 @dForcenet Twitter] (Jul 12, 2021)</ref>

<ref name="reddit-1558">[https://www.reddit.com/r/ethereum/comments/g40ot6/lendfme_dforce_protocol_drained_largest_defi_hack/ lendfme/ dForce protocol drained - largest DeFi hack so far ~ $10M : ethereum] (Jul 12, 2021)</ref>

<ref name="dforcenetmedium-1559">[https://medium.com/dforcenet/a-summary-of-the-attack-on-lendf-me-on-april-19-2020-e2f1c5d96640 A Summary Of The Attack On Lendf Me On April 19 2020] (Jul 12, 2021)</ref>

<ref name="dforcenetmedium-1560">[https://medium.com/dforcenet/lendf-me-asset-recovery-user-manual-440cbeab9ce Lendf Me Asset Recovery User Manual] (Jul 12, 2021)</ref>

<ref name="dforcenetmedium-1561">[https://medium.com/dforcenet/dforce-announces-support-for-imbtc-53bce75f331c Dforce Announces Support For Imbtc] (Jul 12, 2021)</ref>

<ref name="dforcenetmedium-1562">[https://medium.com/dforcenet/launch-of-multiple-asset-support-across-dforce-network-bde4945937c3 Launch Of Multiple Asset Support Across Dforce Network] (Jul 12, 2021)</ref>

<ref name="zhuanlan-1563">[https://zhuanlan.zhihu.com/p/84600615 dForce首个社区项目Lendf.Me正式上线 - 知乎] (Jul 12, 2021)</ref>

<ref name="lendfmegithub-1564">[https://github.com/Lendfme LendfMe · GitHub] (Jul 12, 2021)</ref>

<ref name="coingeek-1565">[https://coingeek.com/decentralized-exchange-lendf-me-set-to-return-funds-following-hack/ Lendf.me exchange set to return funds following $25M hack - CoinGeek] (Jul 12, 2021)</ref>

<ref name="decrypt-1566">[https://decrypt.co/26033/dforce-lendfme-defi-hack-25m Hackers just tapped China's dForce for $25 million in Ethereum exploit - Decrypt] (Jul 12, 2021)</ref>

<ref name="hackernoon-1567">[https://hackernoon.com/is-defi-now-dead-inside-the-dforce-lendfme-25-million-usd-hack-sf5332j3 Is DeFi Now Dead? Inside the dForce / LendfMe 25 Million USD Hack! | Hacker Noon] (Jul 12, 2021)</ref>

<ref name="certik-1776">[https://www.certik.org/blog/blockchain-hacks-2020-15-billion-lost-how-can-we-mitigate-hacks-in-2021 Blockchain Hacks: 2020 | $15 billion lost, how can we mitigate hacks in 2021? | CertiK Foundation Blog] (Jul 23, 2021)</ref>

<ref name="cryptosec-5385">[https://cryptosec.info/defi-hacks/ Comprehensive List of DeFi Hacks & Exploits - CryptoSec] (Jan 8, 2022)</ref>

<ref name="theblockcrypto-5436">[https://www.theblockcrypto.com/amp/linked/62346/multicoin-capital-backed-defi-protocol-dforce-loses-25m-total-locked-value-in-an-exploit Multicoin Capital-backed DeFi protocol dForce loses ~$25M total locked value in an exploit] (Jan 9, 2022)</ref>

<ref name="carnegieendowment-9983">[https://carnegieendowment.org/specialprojects/protectingfinancialstability/timeline Timeline of Cyber Incidents Involving Financial Institutions - Carnegie Endowment for International Peace] (Dec 12, 2022)</ref>

<ref name="unnamed-12199">[https://web.archive.org/web/20200915094347/https://codefi.consensys.net/blog/security-risks-in-ethereum-defi?utm_campaign=ConsenSys%20Newsletter&utm_medium=email&_hsmi=88736023&utm_content=88730521&utm_source=hs_email Security Risks in Ethereum DeFi | ConsenSys Codefi] (Nov 15, 2023)</ref></references>