Euler Finance Hack

Reported loss $197.0M
Ethereum
Flash-loan-funded donation and self-liquidation

What happened

Euler Finance's Ethereum lending protocol was exploited on March 13, 2023 for about $197 million. The attacker used flash liquidity and controlled accounts to create a deliberately unhealthy position, then self-liquidated it under Euler's discounted liquidation terms and withdrew pool assets. Euler later said all recoverable funds were returned; later reporting valued the returned assets at about $240 million after market prices changed.

Technical root cause

donateToReserves() could reduce an account's collateral without checking whether the account remained solvent. Combined with self-borrowing and liquidation incentives, that let an attacker manufacture a profitable liquidation of its own position. Lending protocols must test every collateral-reducing state transition for post-condition solvency, including multi-account liquidation paths funded by temporary liquidity.

How it happened

  1. The attacker borrowed flash liquidity, deposited it into Euler, and used mint() to create a highly leveraged eToken collateral and dToken debt position while intermediate checks passed. donateToReserves() then reduced the attacker's eToken collateral without a corresponding post-operation health check, making the account liquidatable.
  2. A second attacker-controlled account liquidated that bad position at Euler's soft-liquidation discount, acquired eTokens worth more than the debt repaid, redeemed them for underlying pool assets, repaid the flash liquidity, and repeated the path against additional pools.

Protocol details

Classification Lending Protocol / Self-Liquidation Logic
Protocol Type Lending
Affected asset / contract EUL
Implementation language Solidity
Protocol links Website @eulerfinance
Attacker Address 0xB2698C2D99aD2c302a95A8DB26B08D17a77cedd4
Exploit Transaction 0xc310a0affe2169d1f6…da2d6b111d

Funds Recovery

89.8%

Recovered

$177.0M

Net Loss

$20,094,000

Evidence

Understand the attack patterns

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