1inch Recovers Stolen Funds After Negotiation

Recently, 1inch, a decentralized exchange (DEX) aggregator, faced a significant breach of its smart contracts. Following negotiations with the hacker, the exchange has managed to recover most of the $5 million that was stolen.

The incident occurred on March 5, when investigators identified weakness in an outdated version of the platform's smart contracts. After discussions, bolstered by an attractive bug bounty offer, the hacker returned the funds.

"After negotiations with the hacker, most of the $5 million stolen from 1inch has been returned, with the hacker retaining a portion as a bug bounty," reported WuBlockchain, referencing Decurity's analysis.

Understanding the Breach

On March 5, 1inch's team discovered a serious security vulnerability stemming from a flaw in the Fusion v1 resolver smart contract, which had become obsolete. The breach was detected around 6 PM UTC.

The attackers exploited outdated logic within Fusion v1 to carry out unintended transactions. Importantly, no end users were harmed since the attack was directed at a third-party market maker, TrustedVolumes. In response to the breach, 1inch promptly redeployed its resolver contracts to enhance security and prevent further incidents.

Following the breach, the hacker sent an on-chain message proposing a bug bounty in exchange for the return of the stolen funds. TrustedVolumes entered negotiations with the attacker, leading to a successful recovery.

This resolution is notable as it represents a rare outcome in DeFi exploits, showcasing an emerging trend of ethical hacking and negotiations within the DeFi landscape.

Ongoing Security Issues

This incident marks the second security breach 1inch has experienced in the last six months. The previous incident took place in October 2024, when the platform suffered a front-end compromise resulting from a supply chain attack.

This highlights the persistent risks faced by DeFi protocols, emphasizing the need for ongoing monitoring and efficient response strategies to protect users and their assets.

Despite the recovery of the stolen funds, the price of 1INCH has only experienced a modest increase of 1.12% since the onset of this situation, with current trading standing at $0.23.

Ultimately, this incident illustrates the critical importance of regular smart contract audits and proactive vulnerability assessments. Maintaining robust validation mechanisms is vital for preventing similar incidents in the future.