$200 M Venus Protocol hack analysis

Venus protocol $200 M hack analysis

Background

Events

  • On May 8th, Collateral Factor was increased from 60% to 80% for borrowing of funds with XVS as collateral.
  • On May 18th, XVS price shot up from $80 to $145 in 3 hours.
  • A huge amount of loans were borrowed during this time providing XVS as collateral.
  • This led people to sell their XVS to secure profits. In the next 4 hours, XVS price declined sharply to the initial price of $80. This triggered liquidations which led to the $100M+ of bad debt that Venus still can’t recover.
  • On May 19th, Venus founder, Joselito Lizarondo, writes a report about the incident describing how all the funds are safe and there were no attacks on the protocol. He states that the price hike was ‘ caused by large market orders and expectation on the new VRT ’. VRT was Venus’s new reward token that was about to launch.
XVS/BUSD Market Price snapshot from Binance on 18th May 2021
XVS/BUSD Market Price snapshot from Binance on 18th May 2021

What exactly happened?

  • The Venus team used this Binance account in April 2021, to buy back $3.5M worth of XVS. (source)
  • An account, which exploited the Venus protocol in January 2021, for 4000 ETH, also deposited these funds into the same Binance account.
  • The reserve wallet address of Swipe (a wallet by the Venus team) has also made deposits into this Binance account in the past.

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