Arbitrum Faces $1.5M Loss After Attackers Seize Proxy Contract Control

Arbitrum suffered a security breach after hackers stole around $1.5 million in digital assets through a proxy contract attack. The attack involved unauthorized use of smart contract upgrade functions. The monetary transactions were completed within a short time, highlighting the risks involved when upgrading contracts and permissions to access decentralized applications on the network.

The attacker took control of an upgradable proxy contract of USDG and TLP projects, according to a report published by blockchain security firm Cyvers Alerts. When the attacker gained access, they exchanged the assets of Arbitrum for Ethereum. This was laundered to Tornado Cash soon after the exploit had taken place.

Data Reveals a Planned and Coordinated Attack

The data regarding the transactions indicated that the attack was planned. As soon as the attacker gained control, they began to transfer assets. The USDT equivalent of one of the tokens associated with the compromised contracts had been stolen to the tune of around $667,000, a significant portion of the funds stolen in the attack.

According to Cyvers Alerts, unusual contract proceedings had been undertaken before the transfers. Among the addresses that raised suspicion among the analysts were the funding and non-receiving addresses. These trends did not constitute the usual interaction of contracts but rather signified the manipulation of administrative rights instead of the usual user-network interaction on the Arbitrum network.

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Two major addresses had activity after the breach. One of the addresses was connected with the compromised contracts. The second address was also controlled by the attacker. The rapid money circulation followed the tendencies of other contract searches in other blockchain communities.

Arbitrum’s Ongoing Security and Stability Challenges

This incident is also a follow-up to a history of security issues in Arbitrum. One of the attacks on the lending market last year was on WOOFi, a decentralized exchange, which lost $8.75 million. The exploit was based on the WOO token trading and demonstrated some problems in the pricing mechanisms in the protocol.

Arbitrum has also suffered operational hiccups that are not exploitation-related. A network jam and delay in transaction occurred in December 2023 due to the heavy traffic on the network. Past technical problems, which are all reported to have happened as early as 2023, resulted in the cancellation of events and increasing fears among users and developers who had already joined the network.

The larger crypto industry continues to struggle with security issues. In late 2025, reports surfaced about malware attacks designed to steal digital wallets, as well as organized social engineering attacks against crypto players. Such developments emphasize the ongoing pressure on blockchain projects to improve monitoring, access control, and contract security across the ecosystem.

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