Decentralized Finance DeFi Faces Assault Shezmu Protocol Encounters 5 Million Loss Unveiling the Incidents
Decentralized finance (DeFi) protocol Shezmu recently experienced a staggering $5 million theft when a hacker took advantage of a vulnerability in its vault system. However, Shezmu took an unconventional approach by engaging in negotiations with the hacker, ultimately resulting in the recovery of the majority of the stolen funds.
So how did the hacker manage to carry out this audacious heist, and what actions did Shezmu take to mitigate the damage? Let’s break it down:
The Hack: Exploiting a Significant Weakness
The hacker exploited a flaw in one of Shezmu’s vaults, allowing them to generate unlimited collateral and take out loans in ShezUSD without any restrictions. Leveraging this loophole, the hacker successfully drained approximately $5 million from the platform.
Rather than pursuing legal action, Shezmu decided to enter into negotiations with the hacker, offering a 10% bonus in exchange for the return of the stolen tokens. The hacker countered with a demand for 20%, and Shezmu agreed. This agreement put an end to further losses and avoided potential legal complications.
Returning the Funds: The First Step towards Recovery
In a surprising turn of events, the hacker began returning the stolen assets within a day. Initially, DAI, alongside 419.18 ETH including wETH, was returned. Shezmu has since provided assurances regarding the complete recovery of the remaining funds and the stolen capital.
To support the liquidity providers (LPs) impacted by the hack, Shezmu has devised a plan. LPs holding ShezUSD and ShezETH paired assets on Curve, Balancer, and Beefy will be identified through screenshots. These LPs will receive an airdrop covering 80% of the lost liquidity. The remaining 20% will be compensated through debt tokens, which can be redeemed using protocol fees and treasury assets.
Moving forward, Shezmu has outlined its comprehensive recovery and reimbursement plan, which includes the following steps:
1. Snapshot of Impacted LPs:
A snapshot will be taken of all Beefy, Curve, Balancer, and Aura LPs holding ShezUSD and ShezETH paired assets to assess the extent of the impact.
Additionally, Shezmu has activated recovery mode for its Balancer ShezETH pool. This allows LPs to withdraw their funds based on their investments but temporarily prevents new deposits or swaps. The protocol intends to release a thorough post-mortem report, explaining the incident and outlining the measures being implemented to prevent similar occurrences in the future.
What is your opinion on Shezmu’s negotiation strategy? Do you believe it was effective?
Tags: Hack