Decentralized exchange KyberSwap has fallen victim to a sophisticated cyber-attack, resulting in the loss of nearly $55 million in users’ funds. The attack, which took place on November 22, saw attackers exploiting KyberSwap Elastic smart contracts through a series of complex actions, allowing them to withdraw funds into their own wallets.
KyberSwap quickly responded by pausing deposits, launching an investigation, and reaching out to relevant parties. The firm also initiated negotiations with the attackers in an attempt to recover as much of the stolen funds as possible. As part of this effort, KyberSwap offered a 10% bounty to incentivize the return of exploited funds to affected users.
DeFi expert Doug Colkitt shed light on the intricacies of the attack, explaining that it was specific to KyberSwap’s implementation of concentrated liquidity. He noted that the threat actors demonstrated a high level of skill and specialized knowledge by executing a precise sequence of on-chain steps to exploit a vulnerability in the platform.
KyberSwap managed to negotiate the return of 90% of the $5.7 million extracted by frontrun bots from KyberSwap pools on Polygon and Avalanche during the exploit. However, the fate of the remaining $50 million remains uncertain.
In response to the attack, KyberSwap has bolstered its security measures to enhance resilience. These measures include internal smart contract checks and audits conducted by 100proof, ChainSecurity, and community developers through Sherlock’s audit competition. The firm has also encouraged further checks on its smart contracts through its bug bounty program with Immunefi.
The incident serves as a stark reminder of the evolving threat landscape facing the cryptocurrency industry. Despite the challenges posed by sophisticated cyber-attacks, firms like KyberSwap are taking proactive steps to strengthen their defenses and protect user funds.