Raydium Hack on Solana DeFi Exchange Costs Over $2 Million

Updated: 16 December 2022

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For Solana, the holiday season has been difficult.

Solana has now experienced a significant hack to one of its largest DeFi protocols, further causing the network to struggle to recover from the crippling damage caused by the shocking fall of one of its most prominent supporters, disgraced FTX founder Sam Bankman-Fried.

The Solana DeFi protocol Raydium reported early on Friday that a hacker had gained control of the company’s “owner authority” and used that privilege to start draining Raydium’s liquidity pools. Without the use of middlemen, users can trade, borrow, and lend crypto assets to one another using DeFi tools. By enabling users to contribute assets to a pool, frequently in exchange for token rewards, automated market makers like Raydium achieve this.

An exploit on Raydium is being investigated that affected liquidity pools. Details to follow as more is known

⁰Initial understanding is owner authority was overtaken by attacker, but authority has been halted on AMM & farm programs for now
Attacker accnthttps://t.co/ZnEgL1KSwz

— Raydium (@RaydiumProtocol) December 16, 2022

According to research from blockchain analytics company Nansen, a hacker stole over $2.2 million worth of digital assets from such a pool on Raydium in just a few hours, including $1.6 million worth of SOL.

The wallet draining LP Pools from Raydium liquidity pools has received over $2.2M now, including $1.6M $SOL

Track here: https://t.co/IQedsOstPE pic.twitter.com/OAQJgaq5Mc

— Nansen Portfolio (@nansenportfolio) December 16, 2022

It appears that the hacker used one of the protocol owner’s private keys to carry out the attack. It is still unknown how the hacker got access to that data.

One of Solana’s most important decentralized finance protocols, Raydium is regarded as the foundation of the Solana DeFi ecosystem. Many in the Raydium community suggested abandoning the protocol entirely because it was open to such a top-down method of exploitation.

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There seems to be a wallet is draining LP Pools from Raydium liquidity pools using admin wallet as a signer without having/burning LP tokens.

We withdrew protocol provided PRISM/USDC liquidity from Raydium

WITHDRAW YOUR PRISM/USDC LIQUIDITY FROM RAYDIUM

— Prism | V4 (@prism_ag) December 16, 2022

According to CoinGecko, Raydium’s native token RAY dropped more than 8% to $0.16 at the time of writing in the moments after the hack. According to DeFi Llama, the total value locked on the protocol has decreased by more than 27% over the same time period, to $34.73 million as of this writing.

The FTX connection

The exploit was discovered just one month after $650 million in digital assets were stolen from several FTX wallets, which were at the time in the midst of collapse. Later, Bankman-Fried asserted that although the attack was not his fault, it might have been the work of a former FTX employee. Eight criminal counts, including conspiracy, wire fraud, and money laundering, led to Bankman-Fried’s arrest on Monday.

The private keys to Serum, a decentralized exchange and liquidity provider co-founded by Bankman-Fried himself, were discovered to be stored on FTX in the days after FTX’s demise. The fact that Serum was incorporated into almost all significant Solana DeFi projects, including Raydium, caused widespread panic on the network. Raydium and a number of other protocols hurried to sever their ties with Serum before launching a fork of the project free of the FTX repercussions.

Even though the Raydium hack on Friday may not have been related to Serum or FTX, it shows that Solana’s concerns are still very much alive.