Oct 2024 - Shoebill Finance BTC Market Collateral Oracle Exploit - $1.52m (Global)
"Shoebill Finance V2 (aka. Shoebill) is a decentralized finance (DeFi) protocol that provides leveraged investment services on multiple EVM networks and BTC layer2s. Investors borrow assets deposited in Shoebill to maximize the size of their investment and pay interest. The protocol aims to maximize users' returns by building and expanding a circular structure where investors and depositors mutually support each other's returns."
"Users can optimize their yield by borrowing BTC, ETH, STONE, METIS, MANTA, WEMIX, KLAY and then re-staking it to use as collateral to borrow more assets. This strategy allows users to earn yield rewards while minimizing liquidation risk."
"Shoebill V2 maximizes users' ability to leverage other projects for potential returns and redemptions. It provides users with more investment opportunities with relatively low risk by securing a competitive APY through leverage or utilizing BTC/ETH/STONE etc. as another investment opportunity."
"Shoebill V2 will expand with plans to integrate more LST (Liquid Staked Tokens) in the future to provide users with broader options."
"On Oct 31st, Shoebill Finance experienced a security incident affecting the BTC Market on the BOB chain. During the integration of new assets, solvBTC and solvBTC.BBN, a vulnerability was exploited, leading to unauthorized rate of borrowing of the fund."
"The incident stemmed from an unexpected interaction within the oracle configuration during the integration of solvBTC and solvBTC.BBN assets. This interaction inadvertently created an exploitable condition that was leveraged by the attacker through a multi-stage exploit."
"The attacker took advantage of the identified vulnerability and successfully borrowed funds with small amount of collateral from [multiple] Shoebill BTC Market addresses on BOB Chain."
"The attacker proceeded to transfer the stolen amount — totaling 19.512 wBTC and 1.597 tBTC — across multiple bridging protocols, including Meson, Orbiter, and Across, to move funds from the BOB chain to the ETH chain."
"Vulnerability Fix: The vulnerability in the oracle configuration has been resolved to prevent further exploitation."
"Security Review: We conducted a thorough review of our systems and have verified that other markets remain unaffected by this issue."
"Engagement with on-chain security firms: We are actively working with Cryptoforensic and AMLBot to trace the movement of stolen assets across various chains and bridges."
"Law Enforcement: We have reported this incident to law enforcement agencies and are cooperating with them to facilitate any potential recovery of the stolen assets."
"Shoebill Finance remains committed to transparency and security. We will continue to provide updates on this matter as we progress in our investigation and recovery efforts. Our top priority is ensuring the safety and trust of our community."
Further Analysis
Shoebill Finance offers a protocol to allow users to optimize their yield on decentralized assets. Users can gain additional assets via staking, and use those automatically to borrow additional assets. Unfortunately, there was a vulnerability present which allowed users to borrow more than they should have been able to. This was exploited to remove $1.52m USD from the protocol. Shoebill Finance has made continuous efforts to improve their protocol following the attack.
How Could This Have Been Prevented?
More Cryptocurrency Exchange Hacks/Scams/Frauds
MetaWin Ethereum/Solana Frictionless Hot Wallet Exploit > > < < M2 Exchange Access Control Vulnerability
Sources/Further Reading
Shoebill Finance Incident Report — BTC Market on BOB Chain | by Shoebill Finance | Nov, 2024 | Medium (Dec 31)
Shoebill Finance (Dec 31)
Shoebill Finance V2 | Shoebill Finance (Dec 31)
BOB transaction 0xa6e181ea893bfbe2427fd9bca31e1f106d9913882b9f6b0776299e0f456b3c92 (Dec 31)
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