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

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Blockworks exclusive art by axel Rangel

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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.

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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.


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