Cheese Bank Heist

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Cheese Bank

Flash loans are a new feature of decentralized finance which allow attackers to exploit the market conditions in various ways, typically by manipulating the prices of assets at particular oracles.

Smart contracts will typically blindly follow their instructions. In this case, as with others, that's highly lucrative for the attacker, at the expense of anyone else using the platform.

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

About Cheese Bank

"Cheese Bank is a decentralized autonomous digital bank on Ethereum that allows investors to manage asset, including lending, fund management, insurance services etc." "Cheese Bank wants investors to have the option to manage their assets their way."

"An Ethereum-based decentralized finance platform known as Cheese Bank recently suffered a $3.3 million loss — the product of a hack in early November. The thieves utilized a somewhat newly found weakness in the DeFi sector that harnesses flashloans. The Cheese Bank thieves stole the cheddar via dollar-pegged stablecoins USD Coin (USDC), Tether (USDT) and Dai. A number of other platforms have also suffered similar fates in recent days."

"Attacker takes a flash loan from dYdX for 21k ETH. He/she swaps ETH for CHEESE at Uniswap. Attacker transfers both tokens into Uniswap for LP tokens. The hacker mints sUSD tokens with the LP tokens from Step #3. By swapping ETH for CHEESE, the hacker raises the price of CHEESE." The last step is "crucial to the hack’s success because it increased the LP token’s collateral value in Cheese Bank. By manipulating the CHEESE-ETH pool, the hacker could drain the DAI, USDC, and USDT with legit borrow( ) calls. So, with a series of borrow calls at Cheese Bank and swaps at Uniswap, the hacker finished off the job by repaying the flash loan to dYdX and pocketing the rest."

"This particular hack drains $3.3 million of USDC/USDT/DAI from Cheese Bank by exploiting a bug in its way to measure asset price from an AMM-based oracle." "As a result, with a flashloan-based manipulation of collateral price on Uniswap, the exploitation manages to make a series of malicious borrow operations, leading to $3.3 million of USDC/USDT/DAI loss (of Cheese Bank)."

"At the same time, Cheese Bank's developers assure the bug that made the attack possible has already been fixed, however, some features of the platform are still not available due to the associated risks."

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.

Key Event Timeline - Cheese Bank Heist

Date	Event	Description
November 6th, 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 $3,300,000 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?

General Prevention Policies

In general, it's not possible to know if a decentralized smart contract is fully secure against all future threats. The space continues to evolve over time.

For customer assets to remain secure in general, they should be stored offline in a multi-signature wallet held such that at least 3 of 4 different trained operators need to approve the withdrawal.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.