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governance takeover

Crypto Music Service Audius Hacked; Estimated Loss $1.08M

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Crypto music platform Audius came under an attack in the form of a malicious governance proposal that siphoned off over $6.1 million worth of AUDIO tokens, with the hacker making away with $1 million. 

On July 24, a malicious proposal initiated an unauthorized transfer of 18 million AUDIO tokens from the community treasury.

Following the incident, Audius put on hold all smart contracts and AUDIO tokens on the Ethereum blockchain to mitigate further losses.

Hours later it resumed token transfers, adding that the “Remaining smart contract functionality is being unpaused after thorough examination/mitigation of the vulnerability.”

Blockchain researcher Peckshield highlighted the project’s inconsistent storage layout as the root cause.

While the attacker stole 18 million tokens worth nearly $6 million from the treasury, it soon dumped and sold for $1.08 million. Investors feared this could trigger panic selling and recommended an immediate buyback to prevent further lowering of the token’s floor price. 

Audius recently introduce a feature to tip artists

The Web3 music platform has launched a tipping feature for creators to monetize their content by allowing listeners to send tips to artists, the startup said on the 19th of July.

Audius is an Ethereum and Solana-based streaming service aiming to compete with such giants as Spotify and Apple Music by decentralizing and democratizing the fast-growing industry.

It claims it directs the majority share of music revenue to artists [roughly 90%]. The startup was founded by Roneil Rumburg and Forrest Browning, two electronic music lovers, back in 2018.

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Crypto Music Service Audius Hacked; Estimated Loss $1.08M 2

Originally launched on the Ethereum blockchain, the blockchain music platform then shifted part of its service to the Solana blockchain in a bid to reduce fees and scale up its performance.

In addition to that, Staked AUDIO tokens are utilized to vote on governance proposals for implementing network upgrades.  

Last September, the crypto streaming platform announced a $5 million investment round funded by stellar celebrities such as pop star Katy Perry, The Chainsmokers, Linkin Park’s Mike Shinoda, and other heavy hitters within the music industry.

The platform also secured a high-profile partnership with the video-sharing app TikTok in 2021.

A Controversial Voting By A Solana-Based DeFi App Led To Huge Uproar; Here’s Why

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On 19 June 2022, Solana-based DeFi app Solend initiated a voting proposal [SLND1] to mitigate on-chain liquidation risk from a whale having a tremendous margin position.

As per the initial blog post, efforts to contact the largest holder went unanswered, which is why they voted to temporarily take over the big HODler’s wallet till it reaches a safe level.

The voting would grant Solend Labs complete autonomy to liquidate the whale’s position which has nearly $21 million in SOL, through the Over-the-Counter [OTC] route instead of the usual DEXes, in case the token drops to $22.30.

The proposal received overwhelming support with 97% responding YES and 2.5% voting NO. Solend Labs then informed that the special margin requirements for accounts that represent over 20% of borrows have now gone into effect.

Immediately after the proposal was passed, criticisms began to mount over the “forced takeover” questioning whether the platform is truly decentralized. There were also discussions over how the voting was hastily arranged and lasted only a day.

Some posted screenshots where it showed one user with 1,014,210 votes alone. Another quipped,

“VCs, insiders, etc hold the overwhelming majority of wealth in the Solana ecosystem due to the initial token distribution, so it isn’t a surprise that the solend protocol vote passed.”

Solend Proposes To Revoke Previous Voting

Amidst the growing clamor, Solend finally responded with a fresh plan to nullify the earlier proposal [SLND1], increase the voting duration, and bring a new one that does not involve emergency powers to take over an account.

“The price of SOL has been steadily increasing, buying us some time to gather more feedback and consider alternatives”, the platform wrote in its latest blog.

Urging the community to be active for the next few days, the borrowing and lending platform stated,

“We recognize that a voting time of 1 day is still short, but we need to act swiftly to address the systemic risk and the fact that normal users can’t withdraw USDC. We ask our community to be active in governance in the next few days. Voting time will be revisited in a future proposal.”

“We’re committed to protecting user funds, transparency, and doing what’s right”, it added.

Build Finance suffers a loss of $470K in a hostile governance takeover

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Decentralized autonomous venture builder, Build Finance DAO underwent a “hostile governance takeover” recently, resulting in the loss of around $470k in funds, according to a Twitter announcement today. In a series of tweets, the platform revealed how over the last few days, an unknown actor managed to grab a large supply of tokens to vote through a proposal enabling them to gain full control over the DAO’s treasury and its ability to mint tokens. 

Urbane Grandier, a member of Build Finance’s core team, in its Discord server said, “As things stand, the attacker has full control of the government contract, minting keys, and treasury. The DAO no longer has control over any part of the key infrastructure.”

“It is with deep regret that we have to inform the community of this total and irrecoverable loss of BUILD DAO treasury assets through the deeds of one malicious actor,” they added.

Build Finance’s governance incident

The platform’s moderator 0xSHA2 on February 9 posted a message in the Discord server that said someone had made a proposal if passed, would allow them to mint tokens unabated. The moderator encouraged token holders to vote against the proposal. 

According to the tweet thread, this proposal was made by a wallet named Suho.eth. This proposal however failed.

Despite that, the perpetrator was able to send their governance tokens to a separate wallet This time the proposal went unnoticed and was not tracked down by the Discord server’s bot [which would detect proposals and put them in a dedicated channel].

Following that, the malicious attacker was able to create 1.1 million BUILD tokens for themselves. They again stole another 130,000 METRIC tokens from the project’s treasury, sold them, and minted a further 1 billion BUILD tokens. 

Since then, the perpetrator was able to send a large number of funds to the mixer Tornado Cash. The stash transferred added up to nearly 160 ETH, which as per estimates put the heist at around $470,000.

The outcome

Following the incident, Build Finance’s team is now looking to get back the stolen assets. As per the latest update, the team is reportedly in touch with the perpetrator and devising strategies to recover the lost funds.