Yearn asks for money back after it accidentally loses part of its treasury

Updated Dec. 13, 2023 at 1:33 pm ET: Modified headline and context following Yearn clarification.

Thanks to a script error, Yearn lost part of its treasury.

While it initially posted that it lost 63% of the treasury, it corrected its GitHub post to say that it lost “63% of the LP value.” The clarification was made Wednesday after Blockworks published the initial figures.

“When factoring in the 779,958 yvDAI tokens received from this trade, the total loss experienced by Yearn’s treasury comes out to about 63%,” the post said initially.

This loss occurred when a malfunction in a multisig (multi-signature) script led to the unintended swap of Yearn’s treasury balance.

The company clarified that the funds were strictly from Yearn’s treasury, and not from any customer funds.

According to a post, a “faulty multisig script caused Yearn’s entire treasury balance of 3,794,894 lp-yCRVv2 tokens to be swapped.” The incident happened on Dec. 11.

“This amount comprised a large portion of the Curve pool, and therefore incurred significant slippage which arbed back to the normal price by the market shortly after,” Yearn wrote.

“When factoring in the 779,958 yvDAI tokens received from this trade, the total loss experienced by Yearn’s treasury comes out to about 63%.”

The DeFi protocol is also asking “anyone who profitably arbed this mistake to return an amount that they feel is reasonable to Yearn’s main multisig ychad.eth.”

The post explained that multiple oversights led to the faulty transfer. The entire treasury balance, including fees, was transferred to the trading multisig, which sent the transaction to CoW Swap for 30 or so orders — including the one to swap the balance.

The post said that the high volume of trades involved in this single transaction significantly complicated the process of human review, leading to the oversight not being caught in time.

“The script used by the trading multisig to swap tokens lacked sufficient output checks and contained a logical error that would have capped the trade size to a reasonable amount,” Yearn wrote.

The protocol put new checks in place to prevent the same error from happening again. These include segregating protocol-owned liquidity (POL) funds into separate entities, enhancing trading scripts with more human-readable output messages, and imposing “stricter price impact thresholds” during trades.

Earlier this year, Yearn was targeted in an attack. The attacker was able to make off with roughly $11 million in stablecoins.

The attack happened when a vulnerability in a Yearn vault was exploited, allowing the attacker to access tether (USDT) deposits.

Using 10,000 USDT, the attacker then minted 1.2 quadrillion yUSDT — the Yearn-equivalent token — and swapped them for stablecoins using Curve Finance to bag $11.6 million.

Get the news in your inbox. Explore Blockworks newsletters:

The Breakdown: Decoding crypto and the markets. Daily.
0xResearch: Alpha in your inbox. Think like an analyst.
Empire: Crypto news and analysis to start your day.
Forward Guidance: The intersection of crypto, macro and policy.
The Drop: Apps, games, memes and more.
Lightspeed: All things Solana.
Supply Shock: Bitcoin, bitcoin, bitcoin.