Linear Finance's Stablecoin ℓUSD Drained of Liquidity in Hack

Summary

Linear Finance, a DeFi protocol from Hong Kong, experienced a significant hack on the evening of 21/09, resulting in the depletion of its stablecoin Linear USD (ℓUSD) liquidity on PancakeSwap and Ascendex. This incident caused ℓUSD to depeg heavily.

The Attack

The attacker managed to mint an unlimited supply of ℓAAVE, which they then exchanged for ℓUSD on Linear's platform. The ℓUSD was subsequently sold on PancakeSwap and Ascendex, draining the liquidity pools of the stablecoin.

Immediate Response

Linear Finance responded swiftly to the breach by:

1. Halting minting, burning, and trading contracts.
2. Disabling the Linear USD bridge contract.
3. Tracing the hacker and sharing information related to the attacker's wallet addresses with major exchanges and authorities.
4. Initiating efforts to compensate affected users.

ℓUSD price fluctuation on CoinMarketCap as of 08:20 AM on 22/09/2023

Market Impact

According to CoinMarketCap, ℓUSD was trading around $0.9871, up 8% from the previous day, with a 24-hour trading volume surge of 8,380% to $1.96 million. Despite the recovery, ℓUSD had depegged to as low as $0.9 at the hack's peak. CoinGecko's data showed an even steeper depeg, suggesting the price had nearly dropped to zero.

LINA price fluctuation on CoinMarketCap as of 08:20 AM on 22/09/2023

In contrast, Linear's native token LINA exhibited only minor fluctuations, remaining within a 1% range.

Conclusion

Linear Finance's quick actions aim to mitigate further damage and reassure its users while collaborating with authorities to track down the hacker. The community continues to monitor the situation closely as Linear Finance works on restoring stability and compensating affected users.