A recent suspicious transaction caused around $2,40,000 in losses, initially reports suggested Inverse Finance users were affected, but the losses were due to an sDOLA price manipulation that triggered multiple liquidations.
The incident was first reported by BlockSec Phalcon in its X platform on March 2. As it said, “As it is unclear whether additional users may still be affected, we are withholding further technical details at this time. Please take immediate action if you are exposed.”
Then, after a few hours, CertiK Alert also confirmed the incident that an attacker exploited a around $30 million flash loan to manipulate the sDOLA balance on Inverse Finance, leading to incorrect collateral values. Which triggered the liquidation of 27 users’ DOLA-backed positions, allowing the exploiter to profit by about $240,000 in a single transaction.
After hours of reports from BlockSec Phalcon, in response, Founder and developer of Inverse Finance, Nour Haridy said, “False. Inverse Finance was NOT affected. It’s simply an incident in an external protocol that uses the DOLA token. Please correct this.”
In addition, YAM, a DeFi community of sharing insights, posted that this was not an attack against Inverse Finance, but an issue with LlamaLend. The attacker liquidated the majority of users who possessed sDOLA and borrowed crvUSD, temporarily adjusting the sDOLA pricing from about 1.188 to 1.358 per DOLA.
Also, mentioned, “We don’t understand yet how this actually liquidated users. It’s clearly unintentional behaviour, the value of your collateral going up should move you further away from liquidation, not closer.”
Later, BlockSec Phalcon said, “Correction: After further investigation and discussion with@InverseFinance, we confirm that its contract was not affected by the attack.” It was a user loss on LlamaLend due to a flash loan exploiting a faulty oracle configuration in the sDOLA–crvUSD pool.
With that, this is not the first time Inverse Finance has encountered issues with DOLA and its money-market platform, Frontier. In April 2022, Frontier was known as Anchor, and a hacker used a price oracle to steal $15.6 million. They increased the value of $INV tokens, allowing them to borrow against collateral while withdrawing ETH, WBTC, YFI, and DOLA.
