Impossible Finance Fake Token Drain

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Impossible Finance

The Impossible Finance smart contract contained an exploit which allowed for draining the liquidity pool by creating a fake token.

This was exploited. Some funds were returned, and the team made up the difference.

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

About Impossible Finance

"Impossible Finance is a multi-chain incubator, launchpad, and swap platform which offers a robust product-first ecosystem that supports top-tier blockchain projects to targeted user audiences."

"Impossible Finance described the new “v2 swap design” as a big step forward, citing the increased flexibility it provides for market makers in how they provide liquidity into the protocol."

"The company touted the most significant improvement as a novel bonding curve called “xybk invariant,” which essentially achieves an artificial inflation of Total Value Locked (TVL) in pools by a multiplier of boost times."

"The enhancement also paves the way for low slippage trade execution while addressing the issue of Ethereum gas fees that have recently skyrocketed. The record transaction costs on the major blockchain have caused non-whale users to be slowly priced-out of DeFi because fees are eliminating their profits. In addition, many non-yield generating applications such as crypto-based gaming applications are becoming unusable on Ethereum Layer 1."

"On June 21, 2021 Impossible Finance LP contract design flaw was exploited which resulted in the loss of $700K."

"The DeFi protocol Impossible Finance on the BSC chain was attacked by lightning loans, and the attacker made a profit of 1,510.75 WBNB (a total of 497,000 US dollars)." "The attack on the Impossible Finance liquidity pool happened on June 21 and resulted in a loss of 229.84 Ethereum (ETH), valued $500.000 at the time of the exploit."

"Auditing service WatchPug explained that the attack involved consecutive swaps at about the same price, draining the liquidity pool, “which is usually impossible.”" "Using a vulnerability in the LP contract, the hacker managed to swap IF into BUSD at about the price 2 times in a row, which is usually “Impossible” because of the slippage."

Steps taken to produce the exploit: "(1) Borrow 233.3 BNB of flash loan from PancakeSwap. (2) Swapped 65,140 IF token. (3) Created a FAKE token called AAA (BBB). (4) Created LP with the FAKE token and IF. (5) Swapped 32,570 IF into 221,898 BUSD and another 32,570 IF into 221,898 BUSD using IF router thru the FAKE token LP. (6) Repeated the steps from 3 to 5. (7) Sold 556,384 BUSD for 1,731 BNB, repaid the flash loan."

"At step 5, the FAKE token got a special design that will call the swap() function of the LP contract, while the router calls the cheapSwap() function. The swap() call triggered by the transferFrom() of the FAKE token happened before the cheapSwap() call, which will update the price. So that the two swaps can be made at about the same price."

"Some of the funds were returned after an unknown action by BSC team."

"For full transparency we have written an event report and conducted a post-mortem analysis of this attack. Fortunately, this was an isolated incident and users' funds are safe. We are confident for a full recovery and have plans to emerge stronger from this." “All users who deposited into liquidity pools prior to the attack will be 100 percent compensated. We are confident for a full recovery and have plans to emerge stronger from this.”

Impossible Finance "completed full distribution of the reimbursed funds. Affected Liquidity Providers, please check your wallets for the reimbursed funds."

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 - Impossible Finance Fake Token Drain

Date	Event	Description
June 21st, 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 $700,000 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

All affected users were made whole in this case.

Security of smart contracts is similar to hot wallets.

Complex smart contracts generally contain vulnerabilities and cannot be proven secure.

More secure forms of storage are generally simpler offline multi-sig wallets.