Yearn.Finance Ask Traders to Return Gains Following $1.4 Million Multisig Error – What’s Going On?

Last updated: December 14, 2023 06:08 EST
. 2 min read

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1702548575-adobestock-sergey-nivens-___media_library_original_1200_800-1 — Source: AdobeStock / Sergey Nivens

Decentralized finance (DeFi) protocol Yearn.Finance has called on arbitrage traders to return excess profits they accrued as a result of a multi-signature scripting error that led to a $1.4 million drain.

In a Dec 11 GitHub post, the protocol’s contributor, “dudeshan” disclosed that during a fee token conversion, the multi-signature mishap caused the company’s treasure balance of 3,794,894 lp-yCRVv2 tokens to be swapped.

Although it was revealed that the tokens swapped solely affect the protocol’s treasury without users, the revelation sparked diverse reactions amid the recent attack on bridges on other forms of cryptocurrency platforms incidents.

“This amount was strictly protocol-owned liquidity (POL) belonging to Yearn’s treasury and does not contain any user funds. This amount comprised a large portion of the Curve pool, and therefore incurred significant slippage which arbed back to the normal price by the market shortly after.”

The platform’s liquidity pool plummeted 62% relative to the spot price after it suffered massive slippage following a receipt of 779,958 DAI yVauly tokens.

🚨 $1.4M WIPED OUT 🚨

Yearn Finance stated that their treasury fund lost around $1.4M due to a faulty script

Later on, their team claimed that only their LP position was affected, no user’s funds were targeted pic.twitter.com/4FNXN8DAYp

— De.Fi Antivirus Web3 🛡️ (@DeDotFiSecurity) December 13, 2023

Yearn.finance make a bold attempt at recovery

The protocol has called on arbitrage traders who profited from the unfortunate incidents to return excess profits for the overall benefit of the community.

The GitHub note contains a call to users to return amounts they determine are fair due to the incident. “Given that these tokens are critical to Yearn’s yCRV liquidity, we are asking anyone who profitably arbed this mistake to return an amount that they feel is reasonable to Yearn’s main multisig.

Yearn confirmed that the total amount lost totaled $1.4 million with full disclosures of the cause and issues raised by the community. The platform subsequently raised efforts for the refund by sending traders specific traders on-chain messages.

The message identified some traders calling on them to refund what they feel is reasonable and an apology to the traders.

According to Etherscan, a trader has yielded to demands and sent 1 Ethereum (ETH) worth $4,500 to the platform writing a sympathetic message to the protocol.

“Sorry to hear that lads, happens to the best of us. Didn’t profit that bigly as some others did, and we did take on some risk and helped the peg, but here’s some back anyway.”

Next steps for Yearn

Per the GitHub post, the platform hopes to prevent similar mistakes by separating POL funds into “dedicated manager contracts” and enforcing stricter price impact thresholds while onboarding more human-readable output on trading scripts.

Community members have called on more vigorous efforts to prevent a similar occurrence in the future while others called on beneficiaries to return a portion of the profits. The protocol suffered an $11 million exploit in April after a bad actor printed one quadrillion Yearn Tether.