Understanding Local Traders Exploit
Learn how the P2P Exchange Local Traders was exploited, resulting in a loss of 379.32 BNB.
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Learn how the SellToken project was exploited, resulting in a loss of funds worth $87,000.
On May 13, 2023, the SELLC token of the SellToken project was exploited in the BNB chain, resulting in the loss of approximately $87,000.
SellToken is a decentralized short trading exchange that executes requests based on the operations submitted by users' short trading requests.
The root cause of the vulnerability is price manipulation caused by the flawed calculation of their token price.
We attempted to analyze one of the attack transactions executed by the exploiter.
The exploiter took a flash loan of roughly 1902 WBNB from multiple providers and exchanged 400 WBNB for 4,975,497 $SELLC tokens on PancakeSwap.
They then used approximately 13.37 BNB to short $SELLC tokens and later swapped 4,975,497 $SELLC tokens for 408 WBNB on PancakeSwap.
The profit from this shorting was approximately 39.28 WBNB, which were withdrawn from SellToken's contracts, after which the remaining balances were used to repay the borrowed amount of the flash loan.
In order for the attack to succeed, the exploiter had initially transferred 1.8 BNB, allowing this attack contract to take a high price position for the exploit.
The attacker made a profit of approximately 279 BNB, or roughly $87,000 from the exploit.
The attack succeeded because the attacker was able to artificially manipulate the price of the token. This exploit could have been prevented if proper validation techniques had been used to ensure that all potential attack surfaces had been completely fixed. It is essential that the project team conduct rigorous audit procedures with multiple blockchain security firms to prevent such occurrences.
We may not have prevented the occurrence of this hack, however the impact or aftermath of this attack could have been significantly reduced if the team associated with Sell Token had set up a dedicated cover pool in the Neptune Mutual marketplace. We offer coverage to users who have suffered a loss of funds or digital assets occurring as a result of smart contract vulnerabilities owing to our parametric policies.
Users who purchase the available parametric cover policies do not need to provide loss evidence in order to receive payouts. Payouts can be claimed as soon as an incident is resolved through the incident resolution system. At the moment, our marketplace is available on two popular blockchain networks, Ethereum, and Arbitrum.
Neptune Mutual's security team would also have evaluated the platform for DNS and web-based security, frontend and backend security, intrusion detection and prevention, and other security considerations.
Reference Source BlockSec