Alpha Finance Sandwich Attack

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Alpha Finance

The Alpha Finance platform enabled users to be "sandwich attacked", where their orders (public on the blockchain) were taken and packaged within other transactions to create profit for the attacker. This was highly lucrative, creating a net profit of over 40 Ethereum for the attacker. The Alpha Finance platform has agreed to compensate those affected users with some Alpha tokens.

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

About Alpha Finance

"Alpha Finance Lab is a DeFi Lab, and on a mission to build Alpha Universe. Alpha Universe includes the Alpha ecosystem, which consists of Alpha products that interoperate to maximize returns while minimizing risks for users, and other ecosystems incubated through the Alpha Launchpad incubator program."

"A sandwich attack is happening with DeFi protocols and platforms, and are a way of market manipulation. Easily said: The attacker will try to sandwich someones transaction with two of his own transactions, before and after, and therefore making a small loss to the user."

"Let's make an example: A man named Mark wants to buy Bitcoins. He creates a buy order on a decentralised exchange. Let's say he wants to buy 0.1 BTC for $62'000. There is a slippage factor of 0.1% included. During the time where the transaction needs to get confirmed (usually only a few seconds) an attacker sees Marks transaction and recognises whether the price of the currency will go up or down. Now they add their own order and buy right before Marks transaction is confirmed and right after they sell their shares again. So with the slippage factor Marks transaction will get confirmed at a BTC prize of $62’062 due to the attackers pushing the price up."

"These implicit assumptions on Uniswap V2 resulted in 20 addresses on Alpha Homora V2 being impacted and lost a total of 40.93 ETH to miners who extracted this value." "In this case, the implicit assumptions not stated on the Uniswap V2 Router contract resulted in miners successfully extracting values from 20 addresses even though Alpha Homora V2 were audited three times by OpenZeppelin, Quantstamp, and PeckShield."

"We recently received a user report regarding abnormal position value loss in Alpha Homora V2 on Ethereum after the position was opened. Looking at the transaction details, the slippage control values correctly reflected the 1% tolerance, but the LP value still did not conform."

"In short, a Miner Extractable Value (MEV) bot inspected the transaction, bundled the transactions such that the bot could make financial profits, and sent these transactions privately to a particular group of miners who then mined these transactions."

"[T]he Uniswap V2 Router contract has implicit assumptions that are not clearly stated on the contract level. Hence, without stating these assumptions, slippage control for some trades on Uniswap V2 may not be checked and may not be taken into account at all in certain scenarios."

"The issue revolves around the Uniswap V2 Router’s addLiquidity function, which internally calls _addLiquidity." "The function takes 2 amounts: amountXDesired and amountXMin amountXDesired determines the desired amount for adding liquidity to the pool. amountXMin determines the minimum amount of assets used."

"From our investigation, the MEV bots are generalized sandwich attack bots, which are not specific to Alpha Homora V2."

"The fix has been patched." "After we have confirmed and tested the fix, our team proceeded quickly to patch the issue. Extra checks were performed to ensure the pre-conditions are satisfied and such scenarios can no longer happen. The fix has also been confirmed by OpenZeppelin and Peckshield." "The vulnerability was present since the original version of Alpha Homora V2, which has undergone 3 different audits from OpenZeppelin, Peckshield, and Quantstamp. The issue has remained unnoticed until recently, which we had already fixed."

"We have plans to compensate these 20 addresses. However, what’s more important is to share this with our community, especially other builders in the space to be aware of these implicit assumptions that are not stated, how you can detect this as a builder, and how to prevent/mitigate this."

"To uphold the function of Alpha Tokenomics, which serves as an insurance for Alpha products, and the collective moral value we share in our community, 154,671 ALPHA (0.064% of total ALPHA staked) will be extracted from Alpha Tokenomics and be distributed to the relevant users."

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 - Alpha Finance Sandwich Attack

Date	Event	Description
October 23rd, 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 $167,000 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.