Inverse Finance Second Price Oracle Exploit
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Inverse Finance, a decentralized lending protocol, experienced its second hack of the year through price oracle manipulation. The attacker made a profit of $1.26 million in BTC and USDT by exploiting imbalances in assets to calculate LP token prices. The attacker used a flash loan to manipulate pool reserves and quickly sold the stolen funds via Uniswap, laundering them through Tornado Cash. The protocol temporarily halted borrowing services and removed its stablecoin DOLA from its money market, reassuring users that no funds were taken or at risk.
This is a global/international case not involving a specific country.[1][2][3][4][5][6][7]
About Inverse Finance
"DOLA Borrowing Rights replace interest rates with a fixed fee that can earn you more."
"Inverse Finance is a decentralized autonomous organization that develops and manages the FiRM fixed rate lending protocol and DOLA, a debt-backed decentralized stablecoin. Originally founded by Nour Haridy in late 2020, the protocol is now governed by Inverse Finance DAO, a collective of crypto enthusiasts. Our code base is open source and maintained by the community."
"Ethereum-based lending protocol, Inverse Finance, has witnessed its second hack this year. The DeFi lender was exploited via price oracle manipulation through which, the attacker made a profit of $1.26 million in BTC and USDT."
"[T]he hacker misused the balances of assets in the pool to directly calculate the LP token price, further altering the reserves in the pool and facilitating a flash loan attack. The attacker quickly sold the stolen funds via Uniswap, further putting them through Tornado cash.
The protocol’s official Twitter handle acknowledged the exploit and announced that they are temporarily halting the borrowing services because of the hack. Inverse Finance said its over-collateralized stablecoin DOLA was removed from its money market, Frontier. The DeFi platform tweeted — “We are investigating the incident however no user funds were taken or were at risk. We are investigating and will provide more details soon”."
"@InverseFinance was exploited leading to the gain of ~$1.26M for the hacker (The protocol loss may be larger)."
"The hack is made possible due to the price oracle manipulation, which misuses the balances of assets in the pool to directly calculate the LP token price. It is greatly facilitated by the flashloan to skew the reserves in the pool."
"Inverse has temporarily paused borrows following an incident this morning where DOLA was removed from our money market, Frontier. We are investigating the incident however no user funds were taken or were at risk. We are investigating and will provide more details soon."
"The initial fund (1 ETH) to launch the hack is withdrawn from @TornadoCash. Currently 68 ETHs of the illicit gains still stay in the hacker’s account and 1000 ETHs have been deposited to @TornadoCash"
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.
| Date | Event | Description |
|---|---|---|
| June 16th, 2022 2:47:58 AM MDT | Blockchain Transaction | The blockchain exploit transaction. |
| June 16th, 2022 3:51:00 AM MDT | Inverse Finance Tweet | Inverse Finance acknowledges the attack on Twitter. |
| June 16th, 2022 4:33:00 AM MDT | PeckShield Summary | PeckShield shares a summary of the attack. |
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 $1,260,000 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 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
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.
References
- ↑ @VauldOfficial Twitter (Oct 19, 2022)
- ↑ DeFi Hack: Inverse Finance Exploited For The Second Time This Year - Vauld Insights (Aug 25, 2023)
- ↑ @peckshield Twitter (Aug 25, 2023)
- ↑ Ethereum Transaction Hash (Txhash) Details | Etherscan (Aug 25, 2023)
- ↑ @InverseFinance Twitter (Aug 25, 2023)
- ↑ Inverse Finance (Aug 25, 2023)
- ↑ Introduction - Inverse Finance (Aug 25, 2023)