Venus Protocol Suffers $3.7 Million Flash Loan Attack on BNB Chain

A flash loan attack on the Venus Protocol's BNB Chain has caused over $3.7 million in losses, according to recent reports. The attacker exploited the protocol by manipulating the value of THE token to borrow high-value assets before the market collapsed.

The incident occurred when the attacker accumulated a large amount of THE tokens, nearly 3.7 times the protocol's limit, and used them as collateral to borrow high-value assets such as BTC, CAKE, and USDC. The strategy involved depositing THE, borrowing assets, purchasing more THE, and waiting for the TWAP oracle to adjust, inflating the collateral value.

The manipulation caused THE's price to spike from $0.263 to $0.563 before falling to $0.22 as liquidations occurred. This pattern is similar to prior DeFi exploits involving low-liquidity tokens and automated liquidations.

Venus Protocol has since frozen six high-risk markets, including BCH, LTC, UNI, AAVE, FIL, and TWT, and temporarily paused borrowing and withdrawals of THE tokens while investigations continue. The protocol has also tightened collateral rules and plans to review oracle mechanisms to prevent similar attacks in the future.