Arcadia Finance Hit by $455K Exploit on Both Ethereum and Optimism Networks

Non-custodial decentralized finance (DeFi) protocol Arcadia Finance is the latest victim of a $455,000 exploit that occurred on the Ethereum and Optimism networks. Confirming the hack, Arcadia revealed that it is working with security partners to minimize the damage after the contracts are paused.

The platform has also contacted law enforcement to deal with the issue.

• Blockchain security expert PeckShield was the first to notify Arcadia of the attack and reclaimed which was due to “untrusted input validation failure”, which is exploited to drain funds from darcWETH and darcUSDC vaults.
• The firm highlighted another vulnerability in the DeFi protocol, the “lack of re-entry protection”, which allows instant liquidation to bypass the internal health check of the vault.
• Funds stolen from part of the Optimism network were laundered in the controversial coin mixer, Tornado Cash. But the Ethereum portion of the stolen funds, valued at more than $103,000, remained parked in a marked wallet address.
• Arcadia has yet to confirm the validity of the root cause identified by PeckShield, but said an investigation is underway. The last of the protocol statement read,

“We will continue to work with our security partners, law enforcement, and the community at large to resolve this to the best of our ability. Our number one priority is to recover funds for users of the Arcadia protocol.”

• Arcadia is a non-custodial and permissionless protocol that launched on Ethereum and Optimism in March of this year. The platform essentially allows users to trade spot with leverage and increase the ether staked.
• The latest exploit comes amid rampant attacks in the digital asset sector.
• In the first of 2023 alone, Web3 security firm Beosin identified a loss of 470 million dollars in 108 attacks on the DeFi protocol.