Inverse Finance First Price Oracle Exploit
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Inverse Finance, a decentralized organization, experienced a hack through price manipulation of its INV/ETH price oracle on Sushiswap. The attacker manipulated the oracle, leading to a rise in the price of INV tokens, allowing them to borrow $15.6 million worth of DOLA, ETH, WBTC, and YFI. Inverse Finance paused future borrows on its money market, Anchor. This incident follows a similar exploit in April that resulted in a $15.6 million loss for the protocol. The organization plans to propose a repayment plan to its governance and is encouraging the attacker to return the funds in exchange for a bounty.
This is a global/international case not involving a specific country.[1][2][3][4]
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."
"This was not the first time Inverse Finance suffered a multi-million dollar exploit this year. Earlier this April, the protocol fell prey to its first price manipulation hack and lost $15.6 million in DOLA, ETH, WBTC, and YFI."
"the lending protocol took to Twitter, explaining the attack and noted that the attacker used “capital-intensive manipulation of the INV/ETH price oracle on Sushiswap.” This further resulted in “a sharp rise in the price of INV, which subsequently enabled the attacker to borrow $15.6 million”. However, unlike the latest tweet from the protocol, last time they had offered “a generous bounty in exchange for returning the borrowed funds”."
"This morning Inverse Finance's money market, Anchor, was subject to a capital-intensive manipulation of the INV/ETH price oracle on Sushiswap, resulting in a sharp rise in the price of INV which subsequently enabled the attacker to borrow $15.6 million in DOLA, ETH, WBTC, & YFI"
"The manipulation was not a flash loan attack and was un-related to Inverse's smart contract or front end code. All future borrows on Anchor are temporarily paused."
"The plan to be proposed to governance is to ensure all wallets impacted by the price manipulation are repaid 100%. We have multiple avenues for accomplishing this and will provide updates as the DAO discusses our options."
"The person or persons behind the price manipulation are encouraged to reach out via Twitter DM or Discord and discuss a generous bounty in exchange for returning the borrowed 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.
| Date | Event | Description |
|---|---|---|
| April 2nd, 2022 9:44:00 AM MDT | Inverse Finance Tweet | Inverse Finance posts about the incident on Twitter. |
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 $15,500,000 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
- ↑ DeFi Hack: Inverse Finance Exploited For The Second Time This Year - Vauld Insights (Aug 25, 2023)
- ↑ @InverseFinance Twitter (Aug 25, 2023)
- ↑ Inverse Finance (Aug 25, 2023)
- ↑ Introduction - Inverse Finance (Aug 25, 2023)