Prisma Finance TroveManager Exploit

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Prisma Finance Logo/Homepage

Prisma Finance offers a loan making protocol which allows "troves" of collateralized debt positions to be migrated. Unfortunately, an issue happened with the migration to a new trove management protocol, which allowed a Flash loan exploit to take the funds. The attacker initially tried to cash out their funds, then turned around and claimed to be a whitehack hacker. They refused to return funds until the team behind the protocol disclosed their identities and issued a public apology.

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

About Prisma Finance

"The end game for Liquid (re)Staking Tokens Non-custodial and decentralized Ethereum LST & LRT backed stablecoins"

"Prisma is a decentralized borrowing protocol that allows users to mint a stablecoin, mkUSD, that is fully collateralized by liquid staking tokens.

In addition to the collateral, the loans are secured by a Stability Pool containing mkUSD and by fellow borrowers collectively acting as guarantors of last resort. Learn more about these mechanisms under liquidations.

Prisma as a protocol is non-custodial, immutable, and censorship-resistant. Learn more about the protocol here."

"Prisma LRT by Prisma Finance introduces vaults collateralized with Liquid Restaking Tokens (LRTs)" "Earn yield on your mkUSD’s via Prisma’s Stability Pool or on other DeFi apps such as Curve and Convex."

"Prisma enables users to mint a stablecoin, mkUSD, that is fully collateralized by liquid staking tokens. The stablecoin will be incentivized on Curve and Convex Finance to create a capital-efficient flywheel where users can receive trading fees, CRV, CVX, and PRISMA on top of their Ethereum staking rewards.

The Prisma codebase is completely immutable, based on Liquity, creating a robust protocol and truly decentralized stablecoin with favorable and flexible collateral parameters. These features make it attractive for those wanting to get the best out of their LSTs without tail risks from other stablecoins. The Prisma DAO will be in charge of parameters, emissions, and protocol fees."

"Prisma's codebase has received multiple audits from top firms. Our codebase is immutable and without proxies, as DeFi should be."

"The first batch of malicious transactions occurred at 11:29 am UTC on March 28. Prisma Finance is still investigating the root cause of the attack.

Blockchain security firm PeckShield estimated about $11.6 million was stolen and sent to three separate addresses.

The hacker then started swapping the stolen funds to Ether (ETH), according to blockchain security firm Cyvers. PeckShield later observed about 200 Ether was transferred to OFAC-sanctioned cryptocurrency mixer Tornado Cash."

"As shown by PeckShield’s above image, other scammers are trying to benefit from the exploit. Under the official Prisma Finance announcement, a scam Prisma Finance account with a golden badge is trying to redirect users to a suspicious link. On closer inspection, it can be seen that the fraudulent account has no connection to Prisma Finance."

"The protocol suffered a multimillion-dollar exploit on March 28, which was later revealed to be the result of two MigrateTroveZap contracts, which were designed to migrate user positions from one trove manager to another, according to a post-mortem post from Prisma last updated on March 31."

"Prisma Finance deployed a contract called MigrateTroveZap to facilitate trove owners migrating their Troves (collateralized debt positions) to new TroveManager contracts. This was part of a broader system upgrade announced in March 2024.

As part of these updates, Prisma deprecated the original 4 LST (Liquid Staking Token) Vaults with a 4% interest rate cap, replacing them with new LST Vaults, allowing for higher rates. The 3 LRT (Liquid Restaking Token) Vaults were also deprecated and replaced with new versions optimized for more efficient redemptions.

Prisma built the MigrateTroveZap helper contract to ensure a smooth transition, enabling trove owners to seamlessly move their Trove positions from the old TroveManager contracts to the new ones without needing to close positions, remove liquidity, or incur additional costs. The contract uses flash loans to close the user's old Trove and immediately open a new Trove with the same collateral and debt in the new TroveManager, all in one atomic transaction.

These changes followed Prisma's standard DAO governance process, with the migration starting with the deployment of the MigrateTroveZap contract on March 20th, 2024, and the first trove owners migrating Troves using the helper contract from March 23rd onwards."

"“Hi, this is a whitehat rescue, who can I contact to refund,” the exploiter said on March 28, around 6 hours after the attack. The message came from the address “0x2d4…7507a” — which was earlier identified as being one of three addresses linked to the attack."

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 - Prisma Finance TroveManager Exploit

Date	Event	Description
March 28th, 2024 5:29:00 AM MDT	Malicious Transactions	The first batch of malicious transactions happen.
March 28th, 2024 5:33:00 AM MDT	Tweet Warning	A tweet by Cyvers Alerts warns about the attack underway.
March 28th, 2024 7:44:00 AM MDT	PeckShield Analysis	PeckShield shares an analysis of the exploit underway.
March 28th, 2024 8:35:21 PM MDT	CoinTelegraph Update	CoinTelegraph posts another update on the situation.

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 $11,600,000 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.