How Euler Finance Negotiated Its Way Out of a $196 Million Disaster

The Great Heist: A Flash Loan Attack

On a seemingly normal day in March, Euler Finance experienced a colossal setback when hackers executed a flash loan attack, siphoning off a jaw-dropping $196 million from its coffers. Multiple transactions, targeting popular tokens such as Dai (DAI), USD Coin (USDC), staked Ether (StETH), and wrapped Bitcoin (WBTC), left a mark on the decentralized finance (DeFi) landscape.

The Fallout: A Dip in Total Value Locked

After the theft, Euler’s total value locked plummeted from over $311 million to a mere $10.37 million. This wasn’t just a hit for Euler; it sent shockwaves across 11 different DeFi protocols, including heavyweights like Balancer and Yearn.finance, prompting emergency measures like freezing assets and recovery protocols.

The Negotiation Tango

In a shocking twist, Euler Finance commenced a back-and-forth dialogue with the hacker. After several days of chatting (and perhaps some passive-aggressive emojis), the two parties reached an accord. The hacker was offered a way to return most of the plunder without entirely vanishing into the crypto netherworld.

A Dance with Danger: The Ultimatum

On March 15, in a bid to turn the tables, Euler presented an ultimatum. Return 90% of the stolen amounts, or face a $1 million bounty offered for information leading to the hacker’s arrest. It was like a scene from a movie, only instead of guns, it was all about governance tokens.

The Reluctant Redemption

In a twist befitting a soap opera, the hacker started returning stolen funds. One quick-thinking victim even managed to persuade the hacker to return 100 Ether (ETH), claiming it was his life savings at stake. Who knew that a little sob story could go a long way in the cryptosphere?

Unexpected Praise for Recovery Efforts

Amidst the turmoil, Euler’s efforts began to bear fruit. Michael Bentley, CEO of Euler Labs, proudly stated that their protocol had undergone ten separate audits over two years, yielding results that labeled it a low-risk outfit with “no outstanding issues.” He probably wasn’t expecting an armed robbery in the form of smart contracts!

Crowning Moment: The Return of Funds

Fast forward to April 4, 2023—after 23 long days of negotiation and suspense, Euler Finance triumphantly announced the hacker’s decision to return the lion’s share of the funds. The planned $1 million bounty was abruptly halted as news of the funds’ return sprinkled optimism across the crypto community.

Total Recovery: A Happy Ending

In the final act of this chaotic drama, the hacker sent back significant amounts: 12 million DAI and over 10,000 ETH, ensuring that some faith in DeFi was restored. This unexpected turn of events wasn’t just a lesson learned for Euler; it was a moral victory for the broader crypto community, reminding everyone that sometimes, even in the darkest of times, you can find a glimmer of hope—even if it comes from an unexpected source.