Feb 20, 2023

DeFi Firm Platypus to Compensate $8.5M Flash Loan Attack Losses

Crypto firm Platypus is taking steps to compensate users for losses incurred in a flash loan attack that drained nearly $8.5 million from the platform, leading to the depegging of its stablecoin Platypus USD (USP) from the U.S. dollar.

In a tweet on Feb. 18, Platypus said they were working on a plan to reimburse users and asked them not to realize their losses in the protocol, as it would make it more difficult for the company to manage the situation. Asset liquidations have also been paused, the protocol added.

According to the firm, different parties, including legal enforcement officials, are involved in the process of recovering the funds. Further details will be released soon, Platypus noted.

Blockchain security firm CertiK first reported the flash loan attack on the platform through a tweet on Feb. 16, along with the alleged attacker’s contract address. As a result of the attack, the USP token dropped to $0.33 at the time of writing.

The attack was made possible by a logic error in the USP solvency check mechanism in the contract holding the collateral. A suspect has been identified.

Auditing company Omniscia conducted a post-mortem analysis and revealed that the attack was enabled by incorrectly placed code. However, the version of the MasterPlatypusV1 contract that was audited between Nov. 21 and Dec. 5, 2021 did not contain the misordered lines of code.

Flash loan attacks involve exploiting the smart contract security of a platform to borrow large amounts of money without collateral. Once a cryptocurrency asset has been manipulated on one exchange, it is quickly sold on another, allowing the attacker to profit from the price manipulation.

In light of the attack, Platypus is exploring a method to potentially recover the funds, which would require the approval of a recovery proposal in Aave’s governance forum. The firm is also looking into NFT marketing and promotion as a way to attract new users and increase engagement in the web3 space. Platypus is currently searching for a web3 agency to help with NFT marketing and promotion. The agency will be responsible for developing and executing a comprehensive NFT marketing strategy, including Twitter NFT marketing, to increase awareness of Platypus and its NFTs.

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