A Binance Smart Chain-based token FLARE has lost around $17 million in what looks to be an insider-run exploit.
An alert from blockchain security firm PeckShield Inc. on Sunday showed 3.9 billion FLARE tokens, worth approximately $17 million at the time, being drained from the contract.
“To avoid unnecessary confusions, please notice the rugged $FLARE is not related to Flare Networks (w/$FLR),” PeckShield clarified in a tweet.
The firm found that 4,000 BNB in stolen funds was already being laundered through coin-mixer Tornado Cash late on Sunday.
PeckShield first reported the events as an on-chain exploit, but later suggested that it was likely “rugged,” meaning that the project’s internal stakeholders were likely behind draining its liquidity.
The attacker used a “withdrawProfit()” of a verified contract to amass the stolen funds which formed the focal point of PeckShield’s reasoning that the exploit was an inside job.
A separate account from cybersecurity firm Ancilia Inc. found that the attacker used a similar exploit mechanism to the one carried out on OlympusDAO.
The FLARE token dropped 95% in value on Pancake Swap after the exploit, data from Dex Screener shows. According to an incident analysis from web3isgoinggreat, the token’s decline in value and the abrupt dissolution of liquidity is what ultimately lowered the exploit’s value.
DeFi exploits have been on the rise this year, with a total of $3 billion worth of crypto stolen from 125 different hacks in 2022, as per a Chainalysis report last month. Still, recent events surrounding the fall of major centralized exchange FTX has pushed some investors further towards the DeFi narrative for crypto.
“You could never have a non-custodial exchange system in the fiat world, they can’t exist. And crypto, blockchains come along, and suddenly you can build these amazing tools that systematically remove risk from finance,” said ShapeShift founder Erik Voorhees in a recent episode of Unchained.
Voorhees added that it was “disgusting” to see FTX CEO Sam Bankman-Fried invite unfavorable regulation for DeFi.
“And then, to see what he did with customer money is so ironic and tragic, and I hope it wakes people up,” said Voorhees.