Sonne Finance Zero Supply Attack

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Sonne Finance Logo/Homepage

Sonne Finance is a decentralized lending protocol operating on Optimism and Base. Similar to platforms like Compound Finance and AAVE, Sonne allows users to lend assets, use them as collateral, and borrow against them. Sonne fell victim to an exploit, losing $20 million. The exploit targeted a vulnerability present in AAVE and Compound forks, allowing the attacker to manipulate exchange rates and drain funds. This vulnerability had previously affected protocols like Hundred Finance. Sonne Finance released a post-mortem and it's unclear if funds will be recovered.

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

About Sonne Finance

"Sonne Finance is a decentralized lending protocol for individuals, institutions and protocols to access financial services. It is a permissionless, open source and Optimistic protocol serving users on Optimism. Users can deposit their assets, use them as collateral and borrow against them."

"Sonne Finance is an EVM compatible lending/borrowing protocol that launched on Optimism and expanded to Base. Sonne Finance provides peer-to-peer lending solutions that are fully decentralized, transparent and non-custodial.

Similar to (and based from) existing lending platforms like Compound Finance and AAVE users will be able to lend any supported assets on our platform, and use their capital to borrow supported assets."

"Sonne aims to be the prime lending platform on Optimism and Base by offering highest competitive incentives for money markets, having the deepest liquidity and being native to Optimism."

"A fork of Compound V2, Sonne held just over $60 million in TVL prior to the exploit."

"In an infuriating display of ignoring history, Sonne became the latest Compound fork to succumb to an exploit that had already taken down protocols like Hundred Finance a year prior."

"The Sonne Finance team deployed a new market contract for $VELO and a governance proposal was created to activate the market, which had a 4 day total governance period before going live."

"The exploiter appears to have targeted a known vulnerability that exists in all Aave and Compound forks: an attacker can manipulate the exchange rate of a new market with 0 suppliers, drive up the value of collateral, and borrow too much, stealing funds" "This vulnerability has resulted in multiple protocols losing user funds."

"It appears that 4 days ago, the @SonneFinance team deployed a new market contract for $VELO, and a governance proposal was created to activate the market, which has a 4 day total governance period before going live."

"When the governance proposal succeeded 3 days later, and the 24 hour timelock expired, it was now executable by anyone on the Optimism network. The attacker made sure they were the one to execute it, probably by running a bot and hoping they were first to strike. (no MEV on OP)"

"The attacker executed the proposal, along with their attack payload, all in a single transaction. The proposal set the collateral factor on the Sonne $VELO market to 35%, which enabled the attack to occur, and the protocol to immediately be drained of at least 7 figures of funds."

"How could this have been prevented? - Aave and Compound forks should take care to activate new markets without collateral enabled - They should also take care to ensure there are never 0 suppliers in a market. This can be done by sending collateral tokens to the burn address 0x0."

"Sonne was audited by Yearn Finance's yAudit.

The attack vector is listed as high finding, stating “Unclear protection against Hundred Finance attack vector.”"

"It is a tragedy that after many such cases of this exchange rate vulnerability being exploited, protocols continue to learn the hard way that you should not fork code that you don't understand. It is easy to fork open source code, but it is quite challenging to do so safely."

"Sonne Finance is working to recover the stolen funds, considering a bug bounty for their return."

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 - Sonne Finance Zero Supply Attack

Date	Event	Description
May 14th, 2024 4:18:15 PM MDT	Attack Transaction	The attack transaction on the Optimism chain.
May 14th, 2024 6:11:00 PM MDT	Twitter Announcement	The incident is posted on Twitter.
May 14th, 2024 7:00:00 PM MDT	Cyvers Finance Reach Out	The team reaches out to Cyvers Finance.
May 14th, 2024 7:06:00 PM MDT	Luke Youngblood Analysis	Twitter user Luke Youngblood posts a technical analysis of the exploit.

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 $20,000,000 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?

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.