Feb 20, 2023

Platypus to Compensate $8.5M Flash Loan Attack Losses

Crypto firm Platypus has announced a compensation plan for users affected by a flash loan attack which drained nearly $8.5 million from the protocol. This attack caused the stablecoin dollar-peg of Platypus USD (USP) to depeg from the U.S. dollar, dropping to $0.33 at the time of writing.

In a tweet on Feb. 18, Platypus said it was working on a plan to compensate the losses and asked users not to realize their losses in the protocol, saying this would make it easier for the company to manage the issue. Asset liquidations are also paused, said the protocol.

The attack was first reported by blockchain security firm CertiK through a tweet on Feb.16, along with the alleged attacker’s contract address. A technical post-mortem analysis conducted by auditing company Omniscia revealed the attack was made possible by incorrectly placed code after it was audited.

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. Different parties, including legal enforcement officials, are currently involved in the funds’ recovery process. Further details about the next steps will be disclosed soon, noted Platypus.

Flash loan attacks exploit 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 exploiter to profit from the price manipulation.

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