Defrost Finance Liquidated By DeFi Flash Loan Hacker Causing Users $12M Loss

Defrost Finance, a decentralized leveraged trading platform based on the Avalanche blockchain, has announced that both of its versions — Defrost V1 and Defrost V2 — are under investigation for a hack.

iexclusivenews reports that the announcement came after investors reported losing their staked Defrost Finance (MELT) and Avalanche AVAX tickers down $11.58 tokens from the MetaMask wallets.

Doran, a core team member at Defrost Finance, confirmed that Defrost V2 was hit with a flash loan attack just moments after a few users complained about the unusual loss of funds.

At the time, the platform believed Defrost V1 was unaffected by the hack and decided to suspend V2 for further investigation.

Core team member Doran confirming attack on Defrost Finance. Source: Telegram

At the time, the platform believed Defrost V1 had not been compromised by the hack and decided to suspend V2 for further investigation.

Defrost Finance is sad to announce that our V2 has suffered a hack, with an attacker using a flash loan function to withdraw funds.

The V1 is not affected. We will soon close the V2 UI and investigate further with our tech team.

Updates will be posted on our official channels.

— Defrost Finance 🔺 (@Defrost_Finance) December 24, 2022

PeckShield, a blockchain investigator, discovered that the hacker manipulated the share price of LSWUSDC, resulting in a gain of approximately $173,000 for the hacker.

PeckShield’s investigation revealed the following after further examination:

“Our analysis shows a fake collateral token is added and a malicious price oracle is used to liquidate current users. The loss is estimated to be >$12M.”

While the company announced the hack ahead of time, the community suspects a rug-pull situation is at work.

Defrost V1 was initially declared unaffected by the hack because it lacked a flash loan function.

Core team member Doran confirming attack both Defrost Finance versions. Source: Telegram

However, the platform later acknowledged an emergency for V1 as well, stating:

“Our team is currently investigating. We kindly ask the community to wait for updates and refrain from using either the V1 or V2 for the moment.”

Until further notice, investors are advised to stop using Defrost Finance. An internal team is currently investigating the situation and will reach out to users through official channels.

This online news outlet understands that Defrost Finance has yet to responded to Cointelegraph’s request for comment.

North Korean hackers stole more than 800 billion Korean won ($620 million) in cryptocurrency from decentralized finance (DeFi) platforms alone in 2022.

According to a spokesperson for South Korea’s National Intelligence Service (NIS), all North Korean hacks were carried out using overseas DeFi exploits.

However, iexclusivenews Nigeria reports that with KYC initiatives in place, the total number of North Korean hacks has decreased significantly.