Merlin Labs Profit Inflation Vulnerability - Revision history

Azoundria: Another 30 minutes complete. Additional sources merged in. Information moved around. New logo.

2023-11-30T21:26:42Z

Another 30 minutes complete. Additional sources merged in. Information moved around. New logo.

Azoundria at 21:16, 30 November 2023

2023-11-30T21:16:20Z

← Older revision		Revision as of 15:16, 30 November 2023
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	{{Imported Case Study 2\|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}		{{Imported Case Study 2\|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}
	{{Unattributed Sources}}		{{Unattributed Sources}}
	[[File:Merlinlab.jpg\|thumb\|Merlin Labs]]
	The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado.		[[File:Merlinlab.jpg\|thumb\|Merlin Labs]]The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado.

	As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck.		As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck.

	This is a global/international case not involving a specific country.<ref name="blockthreat-2673" /><ref name="peckshieldtwitter-2789" /><ref name="rektnews-2790" /><ref name="reddit-2791" /><ref name="decremist-2792" /><ref name="reddit-2793" /><ref name="vikingswapfinance-1141" /><ref name="openblocksecgithub-2342" /><ref name="bscscan-2794" /><ref name="~~unknown~~-~~6295~~" /><ref name="rektnews-6296" /><ref name="blockthreat-6297" />		This is a global/international case not involving a specific country.<ref name="blockthreat-2673" /><ref name="peckshieldtwitter-2789" /><ref name="rektnews-2790" /><ref name="reddit-2791" /><ref name="decremist-2792" /><ref name="reddit-2793" /><ref name="vikingswapfinance-1141" /><ref name="openblocksecgithub-2342" /><ref name="bscscan-2794" /><ref name="unnamed-12515" /><ref name="rektnews-6296" /><ref name="blockthreat-6297" />

	== About Merlin Labs ==		== About Merlin Labs ==
Line 132:		Line 132:
	<ref name="bscscan-2794">[https://bscscan.com/address/0x2bADa393e53D0373788d15fD98CB5Fb1441645BD Address 0x2bADa393e53D0373788d15fD98CB5Fb1441645BD \| BscScan] (Aug 29, 2021)</ref>		<ref name="bscscan-2794">[https://bscscan.com/address/0x2bADa393e53D0373788d15fD98CB5Fb1441645BD Address 0x2bADa393e53D0373788d15fD98CB5Fb1441645BD \| BscScan] (Aug 29, 2021)</ref>

	<ref name="~~unknown~~-~~6295~~">[~~v v~~] (~~Feb 8~~, ~~2022~~)</ref>		<ref name="unnamed-12515">[https://medium.com/@nelsonblue41/introduction-to-merlin-d489a40cf4d6 https://medium.com/@nelsonblue41/introduction-to-merlin-d489a40cf4d6] (Nov 30, 2023)</ref>

	<ref name="rektnews-6296">[https://rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Feb 8, 2022)</ref>		<ref name="rektnews-6296">[https://rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Feb 8, 2022)</ref>

	<ref name="blockthreat-6297">[https://www.blockthreat.io/p/blockthreat-week-26-2021 https://www.blockthreat.io/p/blockthreat-week-26-2021] (Feb 8, 2022)</ref></references>		<ref name="blockthreat-6297">[https://www.blockthreat.io/p/blockthreat-week-26-2021 https://www.blockthreat.io/p/blockthreat-week-26-2021] (Feb 8, 2022)</ref></references>

Azoundria at 21:15, 30 November 2023

2023-11-30T21:15:38Z

← Older revision		Revision as of 15:15, 30 November 2023
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	{{Imported Case Study 2\|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}		{{Imported Case Study 2\|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}
	{{Unattributed Sources}}		{{Unattributed Sources}}
			[[File:Merlinlab.jpg\|thumb\|Merlin Labs]]
	[[File:~~Merlinlabs~~.jpg\|thumb\|Merlin Labs]]The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado.		The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado.

	As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck.		As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck.

Azoundria at 23:59, 2 May 2023

2023-05-02T23:59:57Z

← Older revision		Revision as of 17:59, 2 May 2023
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	{{Imported Case Study\|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}		{{Imported Case Study 2\|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}
	{{Unattributed Sources}}		{{Unattributed Sources}}

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	As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck.		As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck.

	This is a global/international case not involving a specific country.		This is a global/international case not involving a specific country.<ref name="blockthreat-2673" /><ref name="peckshieldtwitter-2789" /><ref name="rektnews-2790" /><ref name="reddit-2791" /><ref name="decremist-2792" /><ref name="reddit-2793" /><ref name="vikingswapfinance-1141" /><ref name="openblocksecgithub-2342" /><ref name="bscscan-2794" /><ref name="unknown-6295" /><ref name="rektnews-6296" /><ref name="blockthreat-6297" />
	<ref name="blockthreat-2673" /><ref name="peckshieldtwitter-2789" /><ref name="rektnews-2790" /><ref name="reddit-2791" /><ref name="decremist-2792" /><ref name="reddit-2793" /><ref name="vikingswapfinance-1141" /><ref name="openblocksecgithub-2342" /><ref name="bscscan-2794" /><ref name="unknown-6295" /><ref name="rektnews-6296" /><ref name="blockthreat-6297" />

	== About Merlin Labs ==		== About Merlin Labs ==
Line 65:		Line 64:
	!Description		!Description
	\|-		\|-
	\|June 29th, 2021 ~~12:00:00 AM~~		\|June 29th, 2021
	\|Main Event		\|Main Event
	\|Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.		\|Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.
Line 73:		Line 72:
	\|		\|
	\|}		\|}

			== 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 ==		== Total Amount Lost ==
Line 92:		Line 94:
	== Ongoing Developments ==		== Ongoing Developments ==
	What parts of this case are still remaining to be concluded?		What parts of this case are still remaining to be concluded?
			== General Prevention Policies ==
	== Prevention Policies ==
	It is impossible to prove that smart contracts are completely secure, and they should be treated in a similar manner to hot wallets. The majority of funds should be stored in multi-signature wallets with offline keys.		It is impossible to prove that smart contracts are completely secure, and they should be treated in a similar manner to hot wallets. The majority of funds should be stored in multi-signature wallets with offline keys.

	Smart contract hot wallets can improve security through third party security auditing, or providing a bug bounty. Keep funds in the hot wallet minimal and expect losses. Smart contract insurance, setting up a self insurance treasury, or an industry insurance fund may also be possible, which could allow for greater live liquidity.		Smart contract hot wallets can improve security through third party security auditing, or providing a bug bounty. Keep funds in the hot wallet minimal and expect losses. Smart contract insurance, setting up a self insurance treasury, or an industry insurance fund may also be possible, which could allow for greater live liquidity.
			== 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 ==

Azoundria at 03:47, 23 February 2023

2023-02-23T03:47:11Z

Azoundria: Created page with "{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}} Merlin LabsThe newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado. As a result, Merlin Labs clo..."

2023-01-27T20:46:04Z

Created page with "{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}} thumb|Merlin LabsThe newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado. As a result, Merlin Labs clo..."

New page

{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}

[[File:Merlinlabs.jpg|thumb|Merlin Labs]]The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado.

As a result, Merlin Labs closed, and it appears that anyone who lost funds in this or previous exploits is out of luck.

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

== About Merlin Labs ==
"Merlin Lab is the highest APY auto-compounding yield aggregator on BSC." Merlin is a way to "Auto-compound & Earn BTCB, ETH, BNB & extra MERL." "Merlin Lab’s vision is to create a suite of complementary DeFi products that will operate in a harmonious ecosystem."

"User security has always been Merlin Lab’s top priority." "It has been always a top priority and it is for the simple reason that without security the platform can't be run." "Our development team has implemented routine checks of our smart contracts and codes to continuously bring improved security standards into the Merlin ecosystem." "Merlin Labs was audited by Hacken on May 15th." "According to the assessment, the Customer's smart contracts are well-secured." "Our team performed an analysis of code functionality, manual audit, and automated checks with Mythril and Slither."

"On June 29, 2021 Merlin profit inflation vulnerability was exploited which resulted in the loss of $330K."

"The third time’s a charm for Merlin Finance. Why do people keep going back?"

"A total of $330k was stolen, bringing their TVL (total value lost) to $1,560,000, and putting them on par with Value DeFi as one of the few protocols to be so unsafe that they have three positions onto the rekt leaderboard."

"Thank you for your patience. It has been identified that this was an economic exploit."

"The Merlin Dev team had deployed the Alpaca single asset vaults onto the Mainnet for testing this morning. This vault was not supposed to be publicly available or ready to launch to the public."

"Via the smart contract, a hacker deposited 0.1WBNB into the vault and then manually transferred 1000BNB into the contract to trick the contract into thinking it has received 1000BNB in rewards, which resulted in the minter producing MERL rewards."

"Merlin's reward system gave users Merlin tokens for every $ in performance fees they brought in. It was rewarding 35 MERL (~$500 at the time) for every BNB (worth ~$300). When calculating the profit of the strategy, it converted the received BNB to WBNB. The increase in WBNB balance was then seen as the profit. By sending BNB to the contract directly, it is also converted to WBNB and considered "profit". By depositing BNB in the contract, the attacker could harvest and all that BNB would be assumed to be rewardable profit. Straight to ETH, then Tornado and it’s gone."

"Merlin is officially closed."

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 - Merlin Labs Profit Inflation Vulnerability
!Date
!Event
!Description
|-
|June 29th, 2021 12:00:00 AM
|Main Event
|Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.
|-
|
|
|
|}

== Total Amount Lost ==
The total amount lost has been estimated at $330,000 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 ==
There do not appear to have been any funds recovered in this case.

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?

== Prevention Policies ==
It is impossible to prove that smart contracts are completely secure, and they should be treated in a similar manner to hot wallets. The majority of funds should be stored in multi-signature wallets with offline keys.

Smart contract hot wallets can improve security through third party security auditing, or providing a bug bounty. Keep funds in the hot wallet minimal and expect losses. Smart contract insurance, setting up a self insurance treasury, or an industry insurance fund may also be possible, which could allow for greater live liquidity.

== References ==
[https://blockthreat.substack.com/p/blockthreat-week-26-2021 No Title] (Jul 23)

[https://twitter.com/peckshield/status/1409808532040343558 @peckshield Twitter] (Jul 23)

[https://www.rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Jul 23)

[https://www.reddit.com/r/MerlinLab/comments/nq2e80/merlin_lab_is_the_highest_apy_autocompounding/ Reddit - Dive into anything] (Jul 23)

[https://decremist.com/merlinlab-flash-loans-and-upgraded-security-strategy/ Merlinlab flash loans and Upgraded Security Strategy] (Jul 23)

[https://www.reddit.com/r/MerlinLab/comments/ndn0zn/yesterday_felt_like_just_a_few_millions_today/ Reddit - Dive into anything] (Jul 23)

[https://www.vikingswap.finance/files/vikingHackenAudit.pdf VIking Swap Audit - Hacken] (Jun 12)

[https://github.com/openblocksec/blocksec-incidents/blob/main/defi/2021.md blocksec-incidents/2021.md at main · openblocksec/blocksec-incidents · GitHub] (Aug 10)

[https://bscscan.com/address/0x2bADa393e53D0373788d15fD98CB5Fb1441645BD Address 0x2bADa393e53D0373788d15fD98CB5Fb1441645BD | BscScan] (Aug 28)

[v v] (Feb 8)

[https://rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Feb 8)

[https://www.blockthreat.io/p/blockthreat-week-26-2021 https://www.blockthreat.io/p/blockthreat-week-26-2021] (Feb 8)

← Older revision		Revision as of 21:47, 22 February 2023
Line 1:		Line 1:
	{{Imported Case Study\|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}		{{Imported Case Study\|source=https://www.quadrigainitiative.com/casestudy/merlinlabsprofitinflationvulnerability.php}}
			{{Unattributed Sources}}

	[[File:Merlinlabs.jpg\|thumb\|Merlin Labs]]The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado.		[[File:Merlinlabs.jpg\|thumb\|Merlin Labs]]The newly deployed (and not yet intended to be public) Merlin Labs smart contract allowed the attacker to profit a higher value in MERL by sending a smaller amount of BNB. This was obviously a good deal, and the attacker took full advantage of it before mixing their funds on Tornado.
Line 6:		Line 7:

	This is a global/international case not involving a specific country.		This is a global/international case not involving a specific country.
			<ref name="blockthreat-2673" /><ref name="peckshieldtwitter-2789" /><ref name="rektnews-2790" /><ref name="reddit-2791" /><ref name="decremist-2792" /><ref name="reddit-2793" /><ref name="vikingswapfinance-1141" /><ref name="openblocksecgithub-2342" /><ref name="bscscan-2794" /><ref name="unknown-6295" /><ref name="rektnews-6296" /><ref name="blockthreat-6297" />

	== About Merlin Labs ==		== About Merlin Labs ==
Line 97:		Line 99:

	== References ==		== References ==
	[https://blockthreat.substack.com/p/blockthreat-week-26-2021 No Title] (Jul 23)		<references><ref name="blockthreat-2673">[https://blockthreat.substack.com/p/blockthreat-week-26-2021 No Title] (Jul 24, 2021)</ref>

	[https://twitter.com/peckshield/status/1409808532040343558 @peckshield Twitter] (Jul 23)		<ref name="peckshieldtwitter-2789">[https://twitter.com/peckshield/status/1409808532040343558 @peckshield Twitter] (Jul 24, 2021)</ref>

	[https://www.rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Jul 23)		<ref name="rektnews-2790">[https://www.rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Jul 24, 2021)</ref>

	[https://www.reddit.com/r/MerlinLab/comments/nq2e80/merlin_lab_is_the_highest_apy_autocompounding/ Reddit - Dive into anything] (Jul 23)		<ref name="reddit-2791">[https://www.reddit.com/r/MerlinLab/comments/nq2e80/merlin_lab_is_the_highest_apy_autocompounding/ Reddit - Dive into anything] (Jul 24, 2021)</ref>

	[https://decremist.com/merlinlab-flash-loans-and-upgraded-security-strategy/ Merlinlab flash loans and Upgraded Security Strategy] (Jul 23)		<ref name="decremist-2792">[https://decremist.com/merlinlab-flash-loans-and-upgraded-security-strategy/ Merlinlab flash loans and Upgraded Security Strategy] (Jul 24, 2021)</ref>

	[https://www.reddit.com/r/MerlinLab/comments/ndn0zn/yesterday_felt_like_just_a_few_millions_today/ Reddit - Dive into anything] (Jul 23)		<ref name="reddit-2793">[https://www.reddit.com/r/MerlinLab/comments/ndn0zn/yesterday_felt_like_just_a_few_millions_today/ Reddit - Dive into anything] (Jul 24, 2021)</ref>

	[https://www.vikingswap.finance/files/vikingHackenAudit.pdf VIking Swap Audit - Hacken] (Jun 12)		<ref name="vikingswapfinance-1141">[https://www.vikingswap.finance/files/vikingHackenAudit.pdf VIking Swap Audit - Hacken] (Jun 13, 2021)</ref>

	[https://github.com/openblocksec/blocksec-incidents/blob/main/defi/2021.md blocksec-incidents/2021.md at main · openblocksec/blocksec-incidents · GitHub] (Aug 10)		<ref name="openblocksecgithub-2342">[https://github.com/openblocksec/blocksec-incidents/blob/main/defi/2021.md blocksec-incidents/2021.md at main · openblocksec/blocksec-incidents · GitHub] (Aug 11, 2021)</ref>

	[https://bscscan.com/address/0x2bADa393e53D0373788d15fD98CB5Fb1441645BD Address 0x2bADa393e53D0373788d15fD98CB5Fb1441645BD \| BscScan] (Aug 28)		<ref name="bscscan-2794">[https://bscscan.com/address/0x2bADa393e53D0373788d15fD98CB5Fb1441645BD Address 0x2bADa393e53D0373788d15fD98CB5Fb1441645BD \| BscScan] (Aug 29, 2021)</ref>

	[v v] (Feb 8)		<ref name="unknown-6295">[v v] (Feb 8, 2022)</ref>

	[https://rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Feb 8)		<ref name="rektnews-6296">[https://rekt.news/merlin3-rekt/ Rekt - Merlin Labs - R3KT] (Feb 8, 2022)</ref>

	[https://www.blockthreat.io/p/blockthreat-week-26-2021 https://www.blockthreat.io/p/blockthreat-week-26-2021] (Feb 8)		<ref name="blockthreat-6297">[https://www.blockthreat.io/p/blockthreat-week-26-2021 https://www.blockthreat.io/p/blockthreat-week-26-2021] (Feb 8, 2022)</ref></references>