Incident Overview
On May 14th, Sonne protocol was exploited via Compound V2 insufficient precision vulnerability.
Sonne Finance on Optimism has been exploited using a known donation attack on Compound v2 forks, resulting in a loss of approximately $20 million. Despite previous precautions of setting collateral factors to 0% and burning collateral before increasing c-factors, the recent proposal to add VELO markets led to vulnerability. The transactions were scheduled on a multisig wallet with a two-day timelock. After the timelock expired, the exploiter added a c-factor to the markets and executed multiple transactions, exploiting the protocol.
Key steps of the attack included:
Adding liquidity and performing buy-sell operations to generate rewards for LP holders.
Borrowing 35,469,150 VELO from the AMM pool and transferring it to the soVELO contract without minting corresponding soVELO tokens, inflating totalCash.
Using a rounding error to borrow 265 WETH with just 2 wei soVELO.
Repeating the steps to drain the soUSDC and soWETH markets.
Attacker:
https://optimistic.etherscan.io/address/0x5d0d99e9…d80bbb
Exploit example tx:
https://optimistic.etherscan.io/tx/0x45c0ccfd…32db96
Attacker contract:
https://optimistic.etherscan.io/address/0xa78aefd4…c1caf8
Incident Report
Protocol Information
Market Context at Time of Hack
What the Attacker Needed to Succeed
Understanding the prerequisites for this type of attack helps auditors identify protocols that are most at risk and helps developers build better defenses.
What Auditors Should Check
If you're auditing a protocol with similar architecture to Sonne, these are the critical security checks that could have prevented this incident (May 2024).
- Verify all logic paths related to Other are guarded by proper access controls and input validation
- Review privileged functions (owner, admin, governance) for potential abuse vectors - centralization risks should be documented and bounded with timelocks or multi-sigs
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