Exploiters seemed to use a flash loan attack to trick the protocol and steal more than 53 bitcoin, worth $1.1 million, and 10,000 tether (USDT), a stablecoin backed on a 1-1 basis with U.S. dollars. The exploit comes just over two months after attackers stole $15 million worth of cryptocurrencies from Inverse Finance in a similar attack, as previously reported.
During European hours Thursday, Inverse Finance developers paused borrowing functions for users and said they were investigating the incident.
Flash loans are a DeFi-specific mechanism allowing users to borrow high amounts of capital on little collateral as long as the loan is paid back within the same transaction. They are generally used by traders, but bad actors may use flash loans to trick a protocol’s smart contract into manipulating prices on liquidity pools and take over that pool’s assets.
Blockchain data apparently shows the exploiters flash-borrowed some 27,000 wrapped bitcoin from lending protocol Aave to conduct the attack. The funds were routed through swap service Curve for various stablecoins before being used to remove DOLA, a stablecoin, from Inverse Finance pools.
An address tagged as “Inverse Finance Exploiter” on blockchain analysis tool Etherscan apparently sent 900 ether, worth $1 million, to privacy mixer Tornado Cash following the exploit, data shows.
Tornado Cash allows users to mask addresses and is sometimes employed by attackers to hide their stolen funds.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.