ChainCatcher report, according to Decrypt, the DeFi lending protocol Moonwell suffered approximately $1.78 million in bad debt due to an oracle configuration error. After enabling Chainlink’s OEV wrapper contract via governance proposal MIP-X43, Moonwell incorrectly configured the price oracle for cbETH, causing it to be valued at just $1. On-chain arbitrage bots and liquidators quickly exploited this flaw, seizing cbETH collateral worth thousands of dollars by repaying only about $1 in debt. This configuration error led to the liquidation of 1,096.317 cbETH, wiping out most or all of many borrowers’ collateral and leaving the protocol with significant bad debt. Upon discovering the issue, the Moonwell team immediately reduced both the borrowing and supply limits for cbETH to 0.01 to prevent further losses, but the spokesperson declined to comment further on the source of the error or details of the vulnerability.
Moonwell Incurs $1.78M in Bad Debt Due to Oracle Configuration Error
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Summary
The DeFi lending protocol Moonwell reported $1.78 million in bad debt due to a flawed oracle integration. The cbETH price oracle incorrectly valued the asset at $1, allowing traders to liquidate 1,096.317 cbETH with minimal repayment. The error occurred following a governance proposal to enable Chainlink’s OEV wrapper. Moonwell quickly reduced borrowing and supply limits to 0.01 to contain losses. A spokesperson did not disclose the cause. The incident underscores the risks associated with oracle integration and the management of Proof of Stake (PoS) assets.
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