$500 000 USD
DESCRIPTION OF EVENTS
"SharedStake is a staking protocol for Ethereum 2.0 which allows users to mint vETH2 in exchange for their ETH." "SharedStake is a decentralized Ethereum 2 staking solution that allows users to stake any amount of Ether and earn additional yield on top of their ETH2 rewards."
"The SharedStake platform's near-term objective is providing a gateway to stakers, while also providing a yield farming opportunity with two main assets that are created by the protocol: validator Eth2 (vEth2) and the SharedStake Governance Token (SGT)." "SharedStake is built for the transition to and past Ethereum 2.0. The protocol provides Staking-as-a-Service (StaaS), fully decentralized and with minimal fees as a counter to the high costs of Ethereum 2.0 staking. SharedStake will continue to be created by the members of the SharedStake DAO and the SGT roadmap will always be a living document, owned and updated by DAO members for their benefit."
"Users deposited their ETH in the platform in exchange for vETH2, which can be redeemed for ETH when ETH2.0 launches."
"Several people raised red flags about the protocol, suspicious about the developers’ anonymity and lack of transparency on the project’s website."
"SharedStake released an attacked report, stating that the reason the SharedStake token was minted before the official launch was due to the use of vulnerabilities in time-locked contracts (that is, smart contracts that perform certain operations at a fixed time) by internal personnel. The vulnerability was submitted to the team by the white hat Lucash-dev on April 26."
"In a series of transactions on June 19 and June 23, a ‘rogue developer’ withdrew $500K worth of SGT, the project’s governance token, from the team’s allocation. These tokens were locked in a vesting contract and were meant to be unlocked gradually over time as the project progressed." "Because a team member had permission to view the vulnerability, he used the vulnerability to cast a value of about 50 on the main network four times on June 19 and 23. Ten thousand USD tokens were sold and mortgaged after the official launch."
"One of the developers of SharedStake is using their admin key to exploit the protocol’s governance token SGT." "Other team members have advised users to exit SharedStake’s liquidity mining contracts and the Saddle pool ETH-vETH2 and await further updates."
"PSA: A rogue dev from SharedStake has pulled the rug. Withdraw all SGT and vETH2 liquidity ASAP."
"The SGT tokens were subsequently dumped on the market and the price collapsed from $1.60 to under 3 cents. At the time of writing, SGT is trading at $0.12." "Even though vETH2, a yield-bearing token with a 1:1 price ratio to Ethereum, is still safe, the loss of confidence in SharedStake spurred fears that the incident could lead to vETH2 losing peg."
"The fate of 16K ETH ($32M) hangs in the balance." "It remains unclear if the withdrawal keys needed for this process have been compromised." "In the absence of clear guidance from the SharedStake team, concerned users created their own Discord server to record information and discuss potential legal action."
"The rug pull has led to a community debate around admin keys, the special access codes that allow developers to access and change their protocol’s key contracts."
"Although there is not enough evidence, the core members of SharedStake suspect that it was the work of a new team member. SharedStake stated that it is currently fixing the loopholes and will manage multi-signature agreement funds in the future."
"SharedStake patched [the] timelock vulnerability thanks to a responsible disclosure report by Lucash-dev."
A group of anonymous developers created SharedStake, a staking service which allowed users to put in Ethereum, in exchange for a share of the Ethereum V2 staking rewards.
One of those anonymous team members exploited the smart contract to mint some additional SGT tokens for themselves, which were later sold on the market.
HOW COULD THIS HAVE BEEN PREVENTED?
There were no assets lost in this case.
SGT is clearly a security, which depended on the efforts of a small team to ensure it's success. It's unclear why the token was needed to fundraise the project.
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Sgt Early Timelock Withdraw Post Mortem (Jul 23)
Sharedstake Insider Exploit Postmortem (Jul 23)
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Developer 'rug pulls' Ethereum DeFi project SharedStake, SGT token falls 95% | CryptoSlate (Aug 1)
@Mudit__Gupta Twitter (Aug 1)
SharedStake Dev Goes Rogue, SGT Price Plummets 95% | Crypto Briefing (Aug 1)
SharedStake Down 95% After Insider Exploit - The Defiant - DeFi News (Aug 1)