Crypto Community Shrugs Off Second-Largest Fund Loss As Defi Platform Bug Exposes Additional $66.9M
The hits keep coming for crypto, but it doesn’t seem to be bothering investors. Last week, $90.1 million in cryptocurrency went out to users of the decentralized finance (DeFi) platform Compound, in what CNBC called “an upgrade gone epically wrong.”
Compound’s native token, COMP, dropped in price by 13% when the incident occurred, but bounced back quickly, according to historical price charts at CoinGecko.com.
At the time, Compound Labs founder Robert Leshner said there was a cap to how many tokens could be distributed accidentally, putting the cap at around $92.6 million.
But this weekend, Compound Lab’s founder Robert Leshner reported the token loss at closer to $162 million, roughly $66.9 million more than originally expected. The pool had been replenished, exposing more COMP tokens for distribution. COMP dropped roughly 4.8% as a result of the added exposure.
The Compound bug is the second-largest theft in the history of cryptocurrency after this summer’s hack of the Poly Network led to a $600 million theft on that DeFi platform. Nearly all the money was returned to Poly by white hat hackers.
Last week, Compound Labs founder Robert Leshner tweeted in desperation, “If you received a large, incorrect amount of COMP from the Compound protocol error: Please return it to the Compound Timelock (0x6d903f6003cca6255D85CcA4D3B5E5146dC33925). Keep 10% as a white-hat. Otherwise, it’s being reported as income to the IRS, and most of you are doxxed.”
Shortly after, he backtracked, tweeting, “I’m trying to do anything I can to help the community get some of its COMP back, and this was a bone-headed tweet / approach. That’s on me. Luckily, the community is much bigger, and smarter, than just me. I appreciate your ridicule and support.”
Doxxing refers to making public the private details of a users’ account. For a crypto company, this would be tantamount to a PR nightmare, experts told CNBC.
So, Leshner is at the mercy of the DeFi network’s users to return the crypto, which is not unprecedented. Users who decide to keep the funds and cash out the money will have to pay capital gains tax when they sell.
What Went Wrong?
The error began as a bug in programming, which occurred during a major upgrade. The bug made it possible for hackers – of the white hat and black hat variety – to exploit the system and pull out funds from the platform’s pool of cash. No supplied or borrowed funds were at risk, however, which means investors’ money was safe. The coins’ values were diluted, however, Mudit Gupta, a core developer at DeFi exchange SushiSwap, told CNBC. Gupta called the incident, “not that big of a deal.”
As of Sunday morning, about $38.7 million in coins had been returned to the platform, CNBC reported. As of Monday morning, COMP is down just 2.7%, while major cryptocurrencies Bitcoin and Ethereum are down 2.3% and 1.2%, respectively.
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