DAO Ventures ChainSwap Exploit

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DAO Ventures

DAO Ventures is a robo-advisor and automated investing service for DeFi users. As part of this, they offer users the ability to move between chains using the ChainSwap protocol.

The protocol depends on storing funds in a smart contract hot wallet, which was breached.

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

About DAO Ventures

"DAOventures is a DeFi robo-advisor and automated money management platform. Imagine “Robinhood for DeFi”. It is our mission to make DeFi simpler, accessible & inclusive. We believe in creating a simpler, more accessible, and more open world that is permissionless, inclusive, and guided by our DNA of continuous learning, integrity, and transparency."

"DAOventures is a decentralized finance innovations-based computerized venture reserve that consequently puts into DeFi conventions and creates returns for the asset dependent on hazard order. The item works like an average VC, sourcing productive arrangements, speculation openings, and making returns for their LP." "DAOventures provides a wide range of automated DeFi investment strategies and help people manage their DeFi assets, so that everyone can enjoy the full benefits of DeFi investment with the click of a button."

"DAOventures offer a variety of carefully designed DeFi investment strategies that allow everyone to invest in innovative DeFi investments with the click of a button. Simply select the strategy that best suits the desired risk profile along and approve the transaction. It's as easy as that!"

"ChainSwap is a bridge protocol that links the Ethereum and Binance Smart Chain (BSC) blockchains." "It supports Binance Smart Chain, Ethereum, Polygon, and Huobi Eco Chain."

"According to official sources, the DeFi asset management platform DAO ventures was stolen 300,000 DVG tokens due to a loophole in the ChainSwap contract of the cross-chain asset bridge." "Hackers seized and sold 300,000 DVGs worth $40,000 due to the Chainswap attack."

"@chain_swap has been hacked this morning & @VenturesDao is affected. The hacker has removed 300k $DVG worth $40k from @chain_swap including other tokens. We will be taking a snapshot & for DVG holders who are affected, we will reimburse. More updates to be announced shortly."

Investigation by ChainSwap revealed "a bug in the token cross-chain quota code. The on-chain swap bridge quota is automatically increased by the signature node, which is intended to be more decentralized without manual control. However, due to a logical flaw in code, this led to an exploit by allowing invalid addresses which weren’t whitelisted to automatically increase the amount." "This vulnerability enabled the[ hacker] to steal and mint new tokens for various protocols that were using the bridge to trade across Ethereum and BSC."

"The attacker minted tokens directly to their address, then sold them on BSC’s most popular decentralized exchange, PancakeSwap." "[T]he attacker used the PancakeSwap exchange to convert the stolen tokens to WBNB, DAI, and other tokens."

"For now, ChainSwap has frozen our $DVG tokens on BSC as a precautionary measure. Please take note that $DVG on BSC cannot be swapped on Pancakeswap or transferred to other wallets." "For now, Chainswap has temporarily closed its cross-chain bridge." "ChainSwap worked with the police and OKEx to identify the attackers, and managed to negotiate the recovery of Corra and Rai tokens. An initial email with the attackers suggested the attackers return $1 million."

"DAOventures stated that it has taken snapshots of DVG holders and LPs before the attack, and stated that it will compensate the affected token holders. The DAOventures team stated that the user's assets in DAOventures are safe. Before the compensation plan [was] announced, DAOventures remind[ed] users not to purchase the DVG of the transaction for the time being and pay attention to the latest developments of the team." "[T]he DAOVentures project will take snapshots to compensate affected DVG holders, the project's owner tweeted."

"Chainswap said it had already repurchased a small amount of the affected tokens from the market and returned the contract wallet. The rest will be paid out in full by the Chainswap vault." "ChainSwap team has now prepared and executed a compensation plan in consensus with the affected projects." "In order to bring everybody a more rigorous, efficient bridge, the next development model of ChainSwap will be adjusted to ensure maximum safety."

“Sorry for the trouble, you sound genuinely like great people but money is money,” the attackers of the earlier exploit told ChainSwap.

"All $DVG holders will be able to swap to the newly upgraded $DVD token (DAOventures DeFi) in 1:1 ratios. Snapshot will be taken at 1 block before the exploit took place. For those who had purchased $DVG with no knowledge of the exploit will also be able to swap to the new $DVD token." "With this token upgrade, there would be a more intricate burning mechanism and tiered staking structure in place moving forwards." "[T]he $DVD pending rewards and DVG on BSC will be dropped to your DAOvip DVD account in the form of vipDVD."

"We are doing our utmost best to upgrade the community and security, along with getting back on track with our product development."

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 - DAO Ventures ChainSwap Exploit

Date	Event	Description
July 11th, 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 $35,000 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

Theoretically, decentralized finance will eventually result in hackers having exploited every vulnerability that exists. However, it's impossible to know when that will occur and if a contract is truly secure, as opposed to there still being an exploit that just hasn't been noticed yet. For any complex smart contract, it's impossible to prove security and plenty of fully audited contracts have been exploited.

In this situation, there was luckily not much taken, and it was all ultimately reimbursed. Platforms should, generally, be prepared for the full loss of all assets stored in hot wallets (including smart contracts). Assets that do not need to be accessed quickly should be stored securely in a simple offline multi-signature wallet.

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.