Another DeFi project hacked, $7.6 million drained

Another DeFi project hacked, $7.6 million drained

Saudu Clement
Saudu Clement

FinNexus, a cross-chain DeFi protocol for writing options exposure for several assets from a single collateral pool, has reportedly lost $7.6 million to the cold hands of hackers.

The decentralized options platform reported the hack on Twitter on Monday, advising investors to withdraw their funds from the pool.

Although the project’s team has claimed that the breach was a smart contract hack, industry experts have refuted the claim, suggesting that the private key for the administrator account was compromised or stolen. It could also be an insider job.

Rug Pull or Security Breach?

DeFi analyst Chris Blec is one of those who believe that the admin key was compromised by a team member. Meanwhile, research analyst Igor Igamberdiev took a deep dive into the breach and discovered that the FinNexus contract deployer swapped the token owner with another address on Ethereum and Binance Smart Chain. After this was done, the address minted 323 million FNX on Ethereum and 60 million FNX on Binance Smart Chain. In total, approximately $7.6 million worth of tokens were minted before the hacker started dumping tokens.

Although it is unclear how a hacker gained access to the admin’s private key, there are two possible scenarios. The admin key was either genuinely stolen or FinNexus is only buying time to perfect its rug pull. In their defense, FinNexus has published a report explaining what happened. They explained:

Part of the hardware powering FinNexus has been compromised by malware, in what appears to be a targeted attack on our platform. An unknown hacker infiltrated the FinNexus system and managed to recover the private key to the ownership of the FNX token contract.

FinNexus is the fifth DeFi protocol to be exploited this month following breaches on Spartan, Rari Capital, xToken, and bEarn.

Following the breach, the hacker dumped the minted tokens on centralized and decentralized exchanges, leading to a crash in the price of FNX tokens. Data on CoinGecko shows that the digital asset sharply fell from $0.35 before the hack to $0.018. As of press time, FNX was trading at $0.054, which is still a far cry from its pre-hack figures.

As part of its recovery plan, the team has noted that its first step will be replacing FNX with a new token. A pre-hack snapshot will be taken, and users will receive a new coin in what the team has dubbed “a second start for FinNexus.”