Avalanche-based decentralised finance (DeFi) protocol Defrost Finance said it would soon refund users after recovering $12 million worth of digital assets from hackers yesterday.

Defrost Finance Recovers Stolen Funds

On December 25, Defrost announced that its V2 products had been exploited, with attackers using a flash loan function to withdraw funds from the platform. At the same time, the protocol said the hackers also managed to steal the owner key for a second, much larger attack on its V1 product. The funds stolen amount to approximately $12 million.

Following the hack, Defrost said it was willing to offer the hackers a 20% bounty if they returned the stolen funds. Less than 24 hours later, the project announced that the hackers involved in the V1 exploit had returned all the funds stolen.

Refunding Process

In the latest development, the platform released a Medium post on Tuesday, sharing several major steps on how it intends to return these assets to its rightful owners before the attack.

These steps include converting all Ether (ETH) to stablecoins (preferably DAI) at the on-chain market rate. After that, all stablecoins will be moved from Ethereum to Avalanche.

Defrost said it would also start scanning the data on-chain to “find out who owned what” before the attack. The team added that details would be released to the public once the scanning work is completed.

The DeFi protocol noted that a refunding smart contract would then be deployed to enable rightful users to claim their assets, which are already converted to stablecoins to their original wallet addresses.

Defrost’s Hack Raises Red Flags

Meanwhile, the Defrost hack has raised red flags among several industry security firms. Blockchain security firm Peckshield said it had received community intel, which revealed that the exploit may have been a rug pull.

Another security firm CertiK also alleged that the exploit was an exit scam after contacting several members of the Defrost team but getting no response.

However, these allegations may not be entirely accurate as the Defrost team is still communicating with users through different channels after the exploit.

~ By William A. Frederick ~