Inverse Finance exploited again for $1.2M in flashloan oracle attack

Simply two months after shedding $15.6 million in a value oracle manipulation exploit, Inverse Finance has once more been hit with a flashloan exploit that noticed the attackers make off with $1.26 million in Tether (USDT) and Wrapped Bitcoin (WBTC).

Inverse Finance is an Ethereum based mostly decentralized finance (DeFi) protocol and a flashloan is a kind of crypto mortgage that’s often borrowed and returned inside a single transaction. Oracles report exterior pricing info.

The newest exploit labored through the use of a flashloan to control the worth oracle for a liquidity supplier (LP) token utilized by the protocol’s cash market software. This allowed the attacker to borrow a bigger quantity of the protocol’s stablecoin DOLA than the quantity of collateral they posted, letting them pocket the distinction.

The assault comes simply over two months after an identical April 2 exploit which noticed attackers artificially manipulate collateralized token costs by means of a value oracle to empty funds utilizing the inflated costs.

In response to the assault, Inverse Finance briefly paused borrowing and eliminated its DOLA stablecoin from the cash market whereas it investigated the incident, saying no consumer funds have been in danger.

Inverse has briefly paused borrows following an incident this morning the place DOLA was faraway from our cash market, Frontier. We’re investigating the incident nonetheless no consumer funds have been taken or have been in danger. We’re investigating and can present extra particulars quickly.

— Inverse+ (@InverseFinance) June 16, 2022

It later confirmed that solely the attacker’s deposited collateral was affected within the incident and solely incurred a debt to itself as a result of stolen DOLA. It inspired the attacker to return the funds in return for a “beneficiant bounty”.

Associated: Attackers loot $5M from Osmosis in LP exploit, $2M returned quickly after

In whole, the attacker’s gained 99,976 USDT and 53.2 WBTC from the assault, swapping them to ETH earlier than sending all of it by means of the cryptocurrency mixer Twister Money, making an attempt to obfuscate the ill-gotten features.

The earlier attack in April noticed attackers make off with $15.6 million in ETH, WBTC, YFI and DOLA.

DeFi market Deus Finance suffered from an identical exploit in March, with attackers manipulating a value pairing inside an oracle resulting in a achieve of 200,000 Dai (DAI) and 1101.8 ETH value over $3 million on the time.

Beanstalk Farms, a credit score based mostly stablecoin protocol misplaced all $182 million value of collateral in a flash mortgage assault brought on by two malicious governance proposals which ultimately drained all funds from the protocol.

How the most recent assault went down

Blockchain safety agency BlockSec analyzed that the attacker borrowed 27,000 WBTC in a flashloan swapping a small quantity to the LP token used to submit collateral in Inverse Finance so customers can borrow crypto property.

The remaining WBTC was swapped to USDT, inflicting the worth of the attacker’s collateralized LP token to rise considerably within the eyes of the worth oracle. With the worth of those LP tokens now value way more as a result of value rise, the attacker borrowed a bigger quantity than traditional of the DOLA stablecoin.

The worth of the DOLA was value way more than the deposited collateral, so the attacker swapped the DOLA to USDT, and the sooner WBTC to USDT swap was reversed to repay the unique flashloan.