Another Day in DeFi: A Hack, a Rug Pull, and $10 Million Saved

The world of decentralized finance (DeFi) is a constantly evolving landscape, often showcasing some of the boldest experiments in the crypto space. Thus, it's no surprise that days filled with DeFi drama are becoming the norm. However, there are silver linings amid the chaos.

Key Takeaways

A critical vulnerability was discovered that put over $10 million at risk.
The lending platform Texture reported a $2.2 million hack, with the hacker returning 90% of the funds after negotiations.
The decentralized exchange GMX suffered a $42 million hack, which affected other platforms using its tokens as collateral.
Kinto's K token experienced significant price drops, leading to accusations of a rug pull, though an update revealed it was related to a sophisticated attack.

DeFi Problems

Unveiling the Risky Backdoor

Security experts from VennBuild have reported the finding of a “critical backdoor” vulnerability. This security flaw was allegedly set up by suspected North Korean hackers, threatening “thousands of smart contracts” and endangering over $10 million for months.

Their discovery was made in collaboration with researchers from Dedaub and the DeFi Security Alliance (SEAL). The danger stemmed from the hackers front-running the initialization of proxy contracts, replacing them with malicious versions and covering their tracks with spoofed logs.

A researcher from VennBuild, known on X as “deebeez,” shared insights, stating, “The backdoor allowed hackers to gain complete control, forwarding calls to the original contract while Etherscan displayed no issues.”

They believe these hackers are part of a sophisticated group focused on larger targets rather than small hacks. “We remained stealthy to prevent alerting them. It’s a high-stakes game,” said the researcher.

Trouble for Texture

In unfortunate news, lending platform Texture announced that it suffered a hack amounting to $2.2 million from its USDC Vault contract. In an effort to recover the stolen funds, the team reached out via X, offering the hacker a 10% reward for returning the remaining assets. They adopted a tough stance, indicating that the hacker made an operational mistake but it's “not too late to resolve the situation.”

This approach seems to have had a positive effect, as the hacker has reportedly returned 90% of the stolen money back to Texture.

GMX Hack Spills into the Market

On the same day, another severe incident occurred when decentralized exchange GMX was hit by a hack worth $42 million on the Arbitrum network. The damage extended beyond GMX, impacting the lending platform Abracadabra, which faced $9 million in collateral damage due to the compromised GLP token associated with GMX.

Fears circulated that many forks of GMX v1 could also be susceptible to similar attack vectors.

Kinto's K Token: A Mysterious Drop

Screenshots depicting price drops aren’t unusual in the crypto world, but the recent price movements of Kinto’s K token caught considerable attention. While many were quick to accuse the team of a rug pull—suggesting insiders sold off large amounts of tokens to devalue them—the situation is more complex.

The initial response from Kinto was vague, raising suspicions among users. One user expressed, “This doesn’t even address the issue,” and further accusations of the team selling “their bags” surfaced.

However, a subsequent update shed light on the situation, revealing a resemblance to the proxy backdoor incident reported by VennBuild. Kinto's co-founder, Ramon Recuero, attributed the price drop to a “state actor” who upgraded the K token’s implementation on Arbitrum. This actor reportedly minted counterfeit K tokens, which were then quickly sold, while Arbiscan failed to flag the fraudulent proxy implementation.

In the world of DeFi, it seems that chaos is more of a rule than an exception.

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