On June 12, 2023, Sturdy Finance was hacked on Ethereum Mainnet. The hackers were able to exploit a vulnerability in the protocol’s borrowing pool, which allowed them to steal around $800K worth of ETH.

Sturdy Finance is a decentralized finance (DeFi) protocol that allows users to borrow and lend assets without paying interest. Instead of charging borrowers interest, Sturdy stakes their collateral and passes the yield to lenders. This model changes the relationship between borrowers and lenders to make Sturdy the first positive-sum lending protocol.

To learn more about the Project, check out the official documentation.

Attacker Address : 0x1e8419e724d51e87f78e222d935fbbdeb631a08b

Attack Transaction : 0xeb87ebc0a18aca7d2a9ffcabf61aa69c9e8d3c6efade9e2303f8857717fb9eb7

Attack Contract : 0x0b09c86260c12294e3b967f0d523b4b2bcdfbeab

Sturdy Exploited Contract : 0x46beA99d977F269399fB3A4637077bB35F075516

The root cause of the exploit was a read-only reentrancy present in Balancer's PoolBalances.sol smart contract. The vulnerable function was _joinOrExit(...) which was marked protected with non-Reentrant modifier but was still vulnerable. Since there was an external call involved in the function, this caused the exploit to happen.

1. Attacker took a flashLoan of 50,000 wstETH and 60,000 WETH from AAVE.

2. Attacker minted 1023 steCRV tokens using Curve steCRV Pool by depositing 1100 ETH

3. 109,517 B-stETH-STABLE tokens were also minted by depositing 50,000 wstETH and 57,000 WETH in Balancer Pool.

4. Attacker borrowed 513 WETH from Sturdy Lending Pool using two tokens as collateral. (1000 steCRV & 233 B-stETH-STABLE)

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5. Increase the price of the B-stETH-STABLE, so that steCRV can be set as non collateral. Since now the price of B-stETH-STABLE is increased, PoolBalances.sol/exitPool() is called.

This function calls PoolBalances._joinOrExit()function which is vulnerable to read only vulnerability and does an external call indirectly.

further call-graph is as follows :

PoolBalances._joinOrExit() --> PoolBalances._callPoolBalanceChange() --> AssetTransferHandler._sendAsset() --> Address.sendValue()

sendValue() is the function using the solidity native call.

The call made by the function then used by fallback of the malacious contract to call Sturdy contract LendingPool.setUserUseReserveAsCollateral() to set the steCRV as non-collateral as after the price manipulation, the protocol considers that only 233 B-stETH-STABLE are able to cover the debt. This function then calls the read function SturdyOracle.getAssetPrice() which gives false output due to the reentrancy present in the function we discussed above The false output is due to the fact that the value comes directly from the Balancer PoolTokens.getPoolTokens() contract.

7. Withdraw the 1000 steCRV tokens from pool.

8. Now, since the price of B-stETH-STABLE has come to normal, liquidate the position in Sturdy Pool with 236WETH to get back 233B-stETH-STABLE.

9. Give the FlashLoan back.

Steps 3-8 are repeated 5 times and are contained in in the exploiter contract as a single function maybe named as "yoink()" This function is called 5 times and contains the logic for steps 3-8.

Immediately after the exploit the exploiter sent the funds to the tornado cash. So, the current owner of the funds is unknown.

On the same day of exploit (June 12, 2023) : Sturdy Finance acknowledged the exploit and tweeted:

They also published a report related to the exploit on June 14, 2023.

• Proper implementation of the function doing external call should be done.

• Tests covering each and every possibility should be written.

• There should be consistency while viewing the state of the blockchain through any source.

• Functions viewing the state of blockchain should utilize more than one source.