Just two months after losing $15.6 million in a price oracle manipulation exploit, Inverse Finance has again been hit with a flashloan exploit that saw the attackers make off with $1.26 million in Tether (USDT) and Wrapped Bitcoin (WBTC).
Inverse Finance is an Ethereum based decentralized finance (DeFi) protocol and a flashloan is a type of crypto loan that is usually borrowed and returned within a single transaction. Oracles report outside pricing information.
The latest exploit worked by using a flashloan to manipulate the price oracle for a liquidity provider (LP) token used by the protocol’s money market application. This allowed the attacker to borrow a larger amount of the protocol’s stablecoin DOLA than the amount of collateral they posted, letting them pocket the difference.
The attack comes just over two months after a similar April 2 exploit which saw attackers artificially manipulate collateralized token prices through a price oracle to drain funds using the inflated prices.
In response to the attack, Inverse Finance temporarily paused borrowing and removed its DOLA stablecoin from the money market while it investigated the incident, saying no user funds were at risk.
Inverse has temporarily paused borrows following an incident this morning where DOLA was removed from our money market, Frontier. We are investigating the incident however no user funds were taken or were at risk. We are investigating and will provide more details soon.
It later confirmed that only the attacker's deposited collateral was affected in the incident and only incurred a debt to itself due to the stolen DOLA. It encouraged the attacker to return the funds in return for a “generous bounty”.
Related: Attackers loot $5M from Osmosis in LP
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