Wintermute Whacked by $160M Hack Exploiting Known Vulnerability

The market making firm remains “solvent” with about $320 million in equity remaining, CEO Evgeny Gaevoy said

article-image

Blockworks exclusive art by axel Rangel

share

key takeaways

  • A bug in vanity address generator Profanity suspected as attack vector, security experts say
  • Stablecoins, the vast majority of the funds, have been deposited to Curve Finance, likely to evade blacklisting

Liquidity provider Wintermute, which provides liquidity across most CeFi and DeFi exchanges, has suffered a major setback in a second security-based incident this year.  

CEO Evgeny Gaevoy disclosed in a Twitter thread on Tuesday that the platform encountered a $160 million breach in its decentralized finance (DeFi) operations. The firm’s CeFi operations and over-the-counter services weren’t affected, he said.

Gaevoy indicated Wintermute remains solvent, with $320 million in equity left after the hack. Users can expect the platform to face disruptions over the next few days until operations return to normal. 

The CEO said the firm is “open to” treating the situation as a white hat, referring to hackers that just test vulnerabilities in a system, as compared to malicious hackers. It’s not known whether that is the hacker’s intent.

Loading Tweet..

Wintermute is among the largest crypto liquidity providers dedicated to crypto market making for exchanges including Binance and Coinbase.

The hack is already having knock-on effects, such as the pausing of trading on Bebob, an upstart DeFi dex using Wintermute’s market making services.

Tuesday’s incident marks the second time the firm was involved with a hack this year. In June, a hacker stole 20 million Optimism tokens by exploiting a failed transaction with Wintermute.

Security experts point to a known bug as Wintermute hack vector

Mudit Gupta, chief security officer at Polygon, guessed in a tweet that the hack was a result of a hot wallet compromise due to the Profanity bug uncovered by 1inch contributors last week. 1inch had warned that wallet addresses generated using the Profanity tool were at risk of compromise.

“If you used Profanity to get a vanity smart contract address, make sure to change the owners of that smart contract,” 1inch staff wrote in a Sept. 15 blog post.

The contributors noted that Profanity’s popularity didn’t mean it wasn’t without defect, and that its vulnerability enabled hackers to “secretly” steal tens of millions of dollars from users’ wallets.

“It’s not a simple task, but at this point it looks like tens of millions of dollars in cryptocurrency could be stolen, if not hundreds of millions,” they said in the post.

The Ethereum address associated with the Wintermute hack held nearly $13 million in wrapped bitcoin (WBTC) and $9.3 million in ETH, among other tokens including matic, DYDX and FTX tokens as of 6:15 am ET on Tuesday.

Most of the stolen funds — $114 million in USDC and USDT stablecoins — have been moved to Curve Finance flagship “3Crv” liquidity pool. That may make it harder for centralized stablecoin issuers Circle and Tether to freeze the tokens, as they are commingled within the $869 million pool.

A Tether spokesperson told Blockworks that the firm is ready to collaborate in any investigation that law enforcement will initiate to help in the recovery of such funds.

Gaevoy didn’t specify when the hack took place or how it happened. In a later tweet, he offered the hacker a 10% bounty on the funds if returned. Wintermute and Circle didn’t return Blockworks’ request for comment by press time.

This story was updated on Sept. 20 at 11:42 pm ET.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Though the opposing flow trend is likely to slow over time, industry watchers note, bitcoin fund assets could one day eclipse the $90 billion gold ETF space

article-image

Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?

article-image

Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month

article-image

It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet

article-image

Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend

article-image

Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million