Cypher Protocol reveals $600K of stolen funds is now frozen on CEXs

Cypher Protocol reveals 0K of stolen funds is now frozen on CEXs

CEX

Solana-based Cypher Protocol has managed to stop around $600,000 of stolen funds from exiting various centralized exchanges.

Solana-based decentralized futures exchange Cypher Protocol has managed to freeze $600,000 worth of crypto stolen from an Aug. 7 security exploit.

In an X (Twitter) post on Aug. 18, Cypher Protocol reported that more than half of the funds stolen have been successfully frozen across centralized exchanges with the help of several independent blockchain investigators.

“The return of these funds will be predicated on the cooperation of these CEXs and seizure warrants being issued by law enforcement,” it said.

update from cypher

~$600k has been frozen across CEXs, the return of these funds will be predicated on the cooperation of these CEXs and seizure warrants being issued by law enforcement
— cypher ©️ (@cypher_protocol) August 17, 2023

Cypher was exploited on Aug. 7 for around $1 million resulting in the protocol halting its smart contracts.

The DeFi exchange enables lending and borrowing through primary accounts with multiple cross-collateralized sub-accounts. However, the vulnerabilities prevented proper tracking of isolated sub-accounts and insufficient margin checks before borrowing, explained blockchain security firm Halborn.

The attacker exploited these code vulnerabilities using multiple accounts to drain an estimated $1 million in various crypto assets including USDT, USDT, SOL, wETH, and a handful of other altcoins.

On Aug. 10, the team managed to make contact with the hacker after it had offered a 10% white hat bounty worth around $120,000.

Two days later, the protocol said the hacker had missed the deadline to return the funds and opened the bounty up to the public. They also hinted at knowing the partial identity of the exploiter.

The reward bounty is now open to the public pic.twitter.com/fEIiQ8rTKN
— cypher ©️ (@cypher_protocol) August 12, 2023

On Aug. 16, Cypher announced a redemption plan and “socialized losses policy” to distribute remaining assets to affected users. A redemption package with protocol assets will be distributed pro rata based on user share, it stated.

“The value used for redemption in relation to a margin account will be based on a snapshot of the account’s assets at the time Cypher protocol was frozen,” totaling around 31 cents on the dollar it added.

*Screenshot from Cypher redemption package. Source: Cypherlabs*

In its latest statement, Cypher thanked blockchain sleuth ZachXBT, adding “he was invaluable to the Cypher team and the main contributor in the initial freezing of funds across multiple CEXs, and also aided in tracking the attacker.”

Cointelegraph reached out to ZachXBT for comment but had not heard back at the time of writing.

According to the De.Fi Rekt database, the Cypher exploit was not the largest so far in August, coming in third.

DeFi protocol Zunami suffered a $2.1 million flash loan attack on Aug. 13 and leveraged yield aggregation platform Steadefi was exploited for $1.1 million on Aug. 7.

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Cypher Protocol freezes smart contract after an estimated M exploit

Coin Telegraph

A crypto wallet suspected to be tied to the exploit shows it gained over $1 million in SOL and UDSC since the attack.

Solana-based decentralized futures exchange Cypher Protocol halted its smart contract after an estimated $1 million exploit.

On Aug. 7, Cypher alerted its 13,500 followers on X (formerly known as Twitter) that it had experienced a security incident and had thus frozen its smart contract.

The team added it is investigating the cause of the exploit and has reached out to the hacker to negotiate a potential return of stolen funds.

Cypher has has experienced an exploit/security incident. The smart contract has been frozen.

The team is currently working with individuals and investigating

To the hacker: We are writing to see whether you would be open to speaking with us about any potential next steps.
— cypher ©️ (@cypher_protocol) August 7, 2023

According to data from Solana blockchain explorer Solscan, the wallet suspected to be tied to the exploit stole approximately 38,530 Solana (SOL) tokens as well as $123,184 USD Coin (USDC) — netting a total of $1,035,203 in illicitly gained funds.

*Total balance of stolen funds in the Cypher attackers' wallet. Source: Solscan*

In the hours following the exploit, the alleged wallet transferred 30,000 USDC to Binance’s Solana USDC address “kiing.sol” in a possible attempt to cash out the stolen funds.

*The alleged hacker transferred 30,000 USDC to Binance. Source: Solscan*

At the time of publication, the alleged hacker has yet to bridge any Solana-based funds to the Ethereum network.

The attack comes amid Cypher Protocol’s mtnDAO hacker house event, which it co-hosts with fellow Solana protocol Marginfi. Marginfi wrote in its Telegram that it remains independent from Cypher and had not been impacted by the attack.

Cointelegraph has reached out to Cypher Protocol for more details but did not receive an immediate response.

This is a developing story, and further information will be added as it becomes available.

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