Bondly Finance Admin Wallet Compromise

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Bondly

Bondly had a CEO who thought that the keys to all funds should be stored in his full control, with the access stored on a "hot" connected system where a hacker was able to gain access. Bondly heavily incentivized staking in their liquidity pool as opposed to holding tokens, by offering strong incentives to do so.

This resulted in a situation where there was a massive honeypot secured by a single key, which was able to be hacked. The team has since restructured into a multi-signature wallet scheme and put together a plan to compensate investors. No funds were able to be recovered from the hacker so far.

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

About Bondly

"Bondly is a brainchild of over 3 years of working in fintech digital escrow payments + love for native DeFi. Adding our cumulative 13 years of traditional financial services, 6 years of eCommerce marketing, 4 years of Ethereum blockchain development, we think this will be one of the most important next steps in DeFi."

"Bondly will be powering the next generation of digital collectibles with crypto projects, brands and artists." "The next generation of payments infrastructure designed for the sale of digital businesses and assets." "Bondly Finance first made headlines in Feb. 2021 after it collaborated with YouTuber Logan Paul to issue Pokémon NFTs on Ethereum." On "8th April 2021 –– Bondly Finance, leader in NFTs and ecommerce, has secured investment under the $100 million fund set up to boost the DeFi ecosystem on Binance Smart Chain."

"Bondly is an interoperable, transparent and portable swap protocol designed to revolutionize traditional escrow methods and make everyone into their own digital marketplace. Our family of trust-enabling products is designed to be a part of everyday buying and selling giving peace of mind for swap or online purchases. Our product BondProtect is a Defi enabled eCommerce gateway specializing in integrating into your favorite online marketplaces very simply and easily with no integration fees, just staking tokens."

"On the evening of July 14, Bondly Finance was compromised by an unknown party." "[A]n Attacker compromised control over corporate wallets that held tokens and NFTs." "Regarding the suspected attack on the digital collectibles market platform Bondly Finance (BONDLY), Bondly officially confirmed on Twitter that it was attacked by an unknown party, and suggested that users stop trading BONDLY tokens. Bondly said that it has taken action and will run the snapshot as often as possible, and more information will be announced as soon as possible."

"Bondly battles the infinite mint." "BONDLY token holders are now at a loss, due to an infinite mint exploit in which the attacker made a profit of $5.9 million." "[A] malicious actor was able to gain access to the Bondly Finance Staking Rewards wallet containing 373,088,023 $BONDLY and subsequently supplied 200,460,000 $BONDLY to borrow a large number of assets that were supplied on ZENTEREST."

"On Wednesday, July 14th 2021, Bondly Finance fell victim to an attack from a malicious actor (Attacker) leading to the transfer of 373,088,023 $BONDLY tokens from the Bondly Staking Rewards contract, 200,460,000 of which were used to mint zenBONDLY in a sophisticated attack on the MANTRA DAO ZENTEREST platform. The breach also extended to a number of Bondly-held wallets, which were also compromised during the attack." "Our project’s interoperability added to the complexity of the investigation, as the attack occurred on the following three chains: Etherum, Binance Smart Chain and Polygon."

"Bondly token price tanked more than 60% within three hours following the attack. PeckShield, a blockchain security and data analytics company, explained the price drop with a 373 million token mint on the Ethereum blockchain. The security firm also claims that the huge mint on Ethereum was performed by the owner’s address."

"The Bondly Protocol exploit was performed by an address associated with the owners of the protocol. Using this address, the attacker was able to mint 373 million BONDLY tokens using the owner transfer operation, according to PeckShield."

"These newly minted tokens were then sold in liquidity pools, enabling the attacker to convert the stolen value to other tokens while causing the value of BONDLY to crash 82% due to the massively inflated supply."

"Upon initial investigation we believe the Attacker, through a well-orchestrated strategy, gained access to a password account belonging to Brandon Smith, CEO of Bondly. The password account contained a mnemonic recovery phrase for his hardware wallet, which when replicated allowed the assailant access to the $BONDLY smart contract, as well as corporate wallets that were also compromised."

"Brandon was advised to immediately remove liquidity from all decentralized exchanges, as he maintained exclusive access to the majority of Bondly’s corporate wallets.These wallets included all decentralized exchange liquidity pool tokens, investment account tokens, staking reserve tokens, eco fund tokens, payroll, company reserves, all NFT wallets, and Opensea reserve."

"As the owner of the majority of Bondly’s corporate wallets, Brandon Smith has voluntarily taken a leave of absence to allow for an objective internal investigation of the incident and relevant subsequent events." "Effective immediately, Bondly Finance Co-Founder Harry Liu will assume the role of CEO for the organization. Brandon Smith is on a temporary, voluntary leave of absence. We have received tremendous support from our community and business partners and as a result, the project continues to move forward."

"Our Co-Founder and CEO Harry Liu will be updating our community with the latest on our dedicated Medium blog post." "We will also be communicating any key information on the bondly.finance site and across our community social channels. We remind $BONDLY token holders that they should withdraw liquidity and not buy any additional tokens."

"We appreciate the patience of our community and investors in allowing us the time to piece together the events that took place during the attack, and we will be announcing more information on next steps for our token redeployment."

"Bondly Finance will reissue its $Bondly token to support token holders who lost liquidity during last night’s compromise. Details of the reissue will be provided shortly."

"To be clear, Sherpas who were supplying assets on ZENTEREST should NOT worry, as all funds will be restored. This was NOT a hack on ZENTEREST and the ZENTEREST smart contracts and code are NOT flawed nor have they been compromised." "We will be looking to come out of this incident stronger than ever and we look forward to some amazing updates ahead in our journey to help everyone store and grow wealth together!"

"Token redeployment plan is now 80% completed and our marketing and product team are currently putting it together. This also includes compensation plan for LPs, exchanges and holders for the snapshot. The plan will be supported with tutorial on how to claim the tokens for those who are unsure. Two audit firms will audit two of our smart contracts. The turnover rate for this process is 3–5 days."

"Moving forward, Bondly will launch a fully secure, multisig ERC20 contract for the revised $BONDLY currency and provide the new token to owners based upon snapshots taken prior to the incident. Additional remedies for those who purchased the token following the hack are being considered and will be detailed in future communications." "Three execs in the team will approve transactions to mitigate security 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 - Bondly Finance Admin Wallet Compromise

Date	Event	Description
July 14th, 2021	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 $5,900,000 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

Keys should be stored offline, as in on a device without any wired connection. No funds should ever be in the hands of a single person. Protocols need to have contingencies and assume that any hot wallet will be breached - it's just a matter of when.

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.