The Arcadia Finance attacker stole funds by liquidating a vault before it could perform a health check, thus interrupting the app’s normal flow of operations, the app’s developer team said in a post-mortem report on July 10, 2023. The attacker compromised the decentralised finance (DeFi) protocol by using a re-entrancy vulnerability, they said in their analysis.
A “re-entrancy exploit” is a flaw that lets an attacker to “re-enter” a contract or interrupt it in the middle of a multi-step procedure, thereby preventing the operation from successfully finishing.
The team has sent the hacker a note requesting the money be returned within 24 hours, while also threatening legal action should the hacker refuse.
On the morning of July 10, Arcadia Finance was robbed of cryptocurrency worth $455,000.
Blockchain security company PeckShield had said in a preliminary analysis that the attacker had leveraged a “lack of untrusted input validation” in the app’s contracts to steal the money.
The Arcadia team, however, refuted the findings saying that PeckShield’s study was flawed. The team did not, however, elaborate on what it believed to be the cause at the time.
According to the latest Arcadia report, the app’s “liquidateVault()” function lacked a re-entrancy check, which allowed the attacker to run the function after withdrawing money, but before the health check had finished. As a result, the attacker might borrow money from the protocol and not return it.
The contracts have now been put on hold until the team develops a patch to bridge the gap.
SEC ‘Wrongfully Attempting’ To Police Crypto Markets, Says Paradigm Counsel
Rodrigo Seira, the special counsel for crypto investment firm Paradigm, has accused the US Securities and Exchange Commission (SEC) of overstepping its jurisdiction in its case against crypto exchange Bittrex.
It said is “wrongfully” going after Bittrex in an effort to control the secondary crypto markets.
The SEC’s case against US-based cryptocurrency exchange Bittrex should be “dismissed”, Seira said in a Tweet thread on July 11, 2023, following Paradigm’s filing of an amicus brief.
The SEC’s claims are based on an arbitrary application of the Howey test, he said.
Earlier, on July 7, 2023, Paradigm had submitted an amicus brief arguing that the financial regulator had exceeded its authority.
In his thread, Seira also brought up a recent admission by SEC Chair Gary Gensler that cryptocurrency exchanges lacked a proper regulatory framework.
Seira also made similar arguments in a July 7, 2023 blog post, noting that the SEC lacks authority because crypto assets do not involve “investment contracts.” As a result, crypto assets do not fall under the agency’s remit.
“Until the SEC engages in the rulemaking Coinbase has requested, the digital-assets industry is stuck in limbo, simultaneously told to ‘come in and register’ yet having no effective means of doing so,” he said.
Coinbase Shares Up 50% Since SEC Lawsuit
Cryptocurrency exchange Coinbase’s stock price has increased in value by more than 50 per cent ever since the US SEC sued it for allegedly providing unregistered securities,
Senior Coinbase executives, including CEO Brian Armstrong, have been selling their shares amid the stock’s growth over the past month, despite being accused of violating US securities laws.
Data from TradingView shows that the price of Coinbase shares increased by 51 per cent, from about $52 on 6 June, 2023 to $78.7 on 7 July, 2023. The stock has also increased by over 133 per cent during the previous six months, with an approximate 50 per cent increase on a year-on-year (y-o-y) basis.
Major Coinbase shareholders have also continued to sell some of their shares despite the company’s rapid expansion. Senior Coinbase personnel, including Armstrong have sold a total of 88,058 shares valued around $6.9 million on 6 July, 2023.
