The Sui Foundation has issued a secured loan to decentralized exchange Cetus to ensure full compensation for users affected by a $223 million exploit. The exploit, which occurred on May 22, targeted a vulnerability in Cetus’ concentrated liquidity market maker contracts, allowing the hacker to manipulate prices via a flash swap and withdraw funds through fake liquidity deposits.
The attacker transferred a significant portion of stolen assets to Ethereum, while validators successfully froze $162 million worth of on-chain assets. The loan from the Sui Foundation will cover the bridged funds that were moved off-chain before the freeze. Cetus plans to combine the loan with its treasury funds to reimburse affected users, pending community approval of an on-chain vote to unlock the frozen wallet funds.
Following the hack, the CETUS token price dropped by 40% and remains 20% lower over the last week. The total value locked (TVL) on the Sui network declined from $2.13 billion to $1.77 billion. Despite the bug residing in Cetus’ code, the Sui Foundation recognized its role in the broader ecosystem security and committed an additional $10 million toward audits, bug bounties, and formal verification tools. This initiative aims to incentivize white-hat hackers to discover vulnerabilities before exploitation, especially in high-value protocols like Cetus.
The swift reaction of validators in freezing assets has drawn mixed reactions from the community, balancing concerns about decentralization with pragmatic measures to reduce losses. Market confidence has seen a rebound; following recovery announcements, CETUS token value increased by over 16%. The Sui Foundation’s strategic involvement highlights the importance of institutional backing and community governance in crisis management within the DeFi sector.
A detailed recovery plan is forthcoming, with compensation efforts slated to start irrespective of the vote outcome, though full recovery depends on the unlocking of frozen funds. The hack underscores ongoing security challenges in DeFi and the critical need for enhanced safeguards to protect users.