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Cover Protocol Attack Perpetrated by 'White Hat,' Funds Returned, Hacker Claims

The exploiter has cashed out over $4 million including about 1,400 ether, one million DAI and 90 WBTC.

Updated Sep 14, 2021, 10:48 a.m. Published Dec 28, 2020, 2:24 p.m.

The decentralized finance (DeFi) insurance project Cover Protocol was hacked earlier Monday in an infinite printing scheme, causing the price of the COVER token to plunge. Hours later, Grap.Finance, a "white hat hacker" claimed responsibility for the attack via their Twitter account, saying all funds had been returned.

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The exploiter has cashed out over $4 million including about 1,400 ether, one million DAI and 90 WBTC. The attacker earlier created 40 quintillion COVER tokens and sold $5 million worth of them on Monday morning. More than $3 million has been returned.

The price of COVER has plummeted to $177 by over 75% over the last 24-hour period, according to the data from CoinGecko.

Cover Protocol later announced it was exploring launching a new token through a snapshot "before the minting exploit was abused."

"The 4350 ETH that has been returned by the attacker will also be handled through a snapshot to the LP token holders. We are still investigating," according to the project's Twitter account, which urged users not to buy any COVER tokens now.

Sorawit Suriyakarn, chief technology officer at Band Protocol, said the exploit's approach appears to be relatively new and was not spotted in any recent attacks.

"The attack does 4 things: 1. Deposit LP tokens to Blacksmith contract 2. Withdraw *almost* all LP tokens to inflate 'accRewardsPerToken' 3. Deposit LP tokens again (this is the interesting bit) 4. Claim COVER rewards and trick the contract to mint quintillion of $COVER tokens," Suriyakarn said in his tweet.

The hacker tricked the protocol into minting new tokens as rewards by exploiting a bug in the smart contract Solidity, which involves using memory and storage incorrectly in the programming language.

The Cover DeFi protocol, designed as an insurance product that could help users reduce smart contract failure-related risks, merged with Yearn.Finance a month ago.

Next time, take care of your own shit.@CoverProtocol @chefcoverage https://t.co/ks94ucdoRQ

1. No gains.
2. The Obtained Funds from LP has been returned to COVER.
— Grap.finance (@GrapFinance) December 28, 2020

This story is developing and will be updated

Update: This story was updated with new information about Cover's latest announcement at 16:25 UTC.

hacking DeFi Yearn Finance Cover Protocol

Kevin Reynolds

Kevin Reynolds was the editor-in-chief at CoinDesk. Prior to joining the company in mid-2020, Reynolds spent 23 years at Bloomberg, where he won two CEO awards for moving the needle for the entire company and established himself as one of the world's leading experts in real-time financial news. In addition to having done almost every job in the newsroom, Reynolds built, scaled and ran products for every asset class, including First Word, a 250-person global news/analysis service for professional clients, as well as Bloomberg's Speed Desk and the training program that all Bloomberg News hires worldwide are required to take. He also turned around several other operations, including the company's flash headlines desk and was instrumental in the turnaround of Bloomberg's BGOV unit. He shares a patent for a content management system he helped design, is a Certified Scrum Master, and a veteran of the U.S. Marine Corps. He owns bitcoin, ether, polygon and solana.

David Pan

David Pan was a news reporter at CoinDesk. He previously worked at Fund Intelligence, and interned at the Money Desk of USA Today and the Wall Street Journal. He does not hold investments in cryptocurrency.