BZx Exchange Price Manipulation

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bZx

The original bZx exchange platform contained a vulnerability which would allow an attacker to manipulate prices, which could have been used to steal platform assets.

The vulnerability was fixed before it was able to be exploited.

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

About BZx

bZx is "[t]he most powerful open finance protocol". You can use it to "[b]uild applications that empower lenders, borrowers, and traders with the most flexible decentralized finance protocol on Ethereum." "Fulcrum is a project built by the bZx team on top of bZx itself. One feature of Fulcrum is the ability to take a loan on an iToken (read more about that here) using any* other token as collateral. In order to determine how much collateral is needed, bZx uses the Kyber Network as an on-chain decentralized oracle to check the conversion rate between the collateral token and the loan token."

"KyberNetwork [is] an on-chain protocol which allows instant exchange and conversion of digital assets (e.g. crypto tokens) and cryptocurrencies (e.g. Ether, Bitcoin, ZCash) with high liquidity. KyberNetwork [aimed to] be the first system that implements several ideal operating properties of an exchange including trustless, decentralized execution, instant trade and high liquidity." "KyberNetwork exchange rates are visible to other smart contracts. Hence, it enables the implementation of advanced financial instruments such as swap contracts. The quotes provided by KyberNetwork are secure as they reflect the real rates which are being used to trade between pairs of tokens."

"On Tuesday September 3rd, samczun, [then known as] the security researcher who found the critical bug in 0x, alerted [bZx] to an exploit leveraging [their] implementation of Kyber’s price feeds." "This was an attack vector that both ourselves and our auditors did not detect."

"The premise of the attack involved manipulating the price feed with a sandwich attack at the time of taking out the loan." The attacker can "significantly affect the apparent exchange rate between WAX and ETH simply by listing an order, which means that we can trick any project which relies on Kyber to provide an accurate FMV." We can "turn a profit of approximately 1200ETH by (1) Listing an order buying 1 WAX for 10 ETH, increasing the price from 0.00ETH/WAX to 10ETH/WAX. (2) Borrowing DAI from bZx using WAX as a collateral. (3) Cancelling all orders and converting all assets to ETH."

"[T]he exploit exists and has never been used. The exploit was immediately patched." "The bZx team blocked this attack by whitelisting tokens which can be used as collateral." "We are thankful to members of the community like samczun for strengthening the security of the ecosystem."

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 - bZx Exchange Price Manipulation

Date	Event	Description
September 3rd, 2019	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

No funds were lost.

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

There were no user funds lost in this case.

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.