Feb 20, 2023

Platypus Announces Compensation Plan for $8.5M Flash Loan Attack

Platypus, a DeFi firm, is devising a plan to compensate users for losses incurred due to a flash loan attack that drained nearly $8.5 million from the platform. Platypus asked users not to realize their losses in the protocol, saying this would make it harder for the company to manage the issue. The asset liquidation process has been paused.

The firm said several parties, including legal enforcement officials, are currently involved in the funds’ recovery process. Further details about the next steps will be disclosed soon. Part of the funds are locked up in the Aave protocol. 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 flash loan attack was first reported by blockchain security firm CertiK on Feb. 16, along with the alleged attacker’s contract address. As a result, the Platypus USD (USP) stablecoin depegged from the U.S. dollar, dropping to $0.33 at the time of writing.

CertiK said the attacker used a flashloan to exploit a logic error in the USP solvency check mechanism in the contract holding the collateral. A potential suspect has been identified.

Auditing company Omniscia conducted a post-mortem analysis and revealed the attack was made possible by incorrectly placed code after it was audited. The version of the MasterPlatypusV1 contract from Nov. 21 to Dec. 5, 2021 did not contain the misordered lines of code.

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

In order to prevent such attacks in the future, Platypus is introducing a comprehensive NFT marketing and promotion strategy that includes Twitter NFT marketing and a specialized NFT marketing agency. The web3 agency will help the platform to reach a broader audience, while also providing insights into the best practices for selling NFTs. The platform is also working on a comprehensive security strategy to ensure the safety of its users’ funds.

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