K9 Finance offers hacker $23K bounty after $2.4M Shibarium hack

Shiba Inu’s decentralized finance platform is trying to recover funds from the $2.4 million exploit that drained assets from its Shibarium bridge over this past weekend. K9 Finance, the liquid staking platform built on Shibarium, has now placed a $23,000 bounty on the attacker.

As seen on Etherscan onchain records, the bounty was announced through an Input Data Message (IDM) under the contract address 0x8504bfE4321d7a7368F2A96E7AA619811AAaB28a. 

DeFi platform K9 Finance has offered 5 ETH to the hacker who exploited the bridge using a flash loan to purchase 4.6 million BONE tokens.

“Bounty will start to decrease in 7-days. Bounty will expire in 30 days. Bounty is live. Please, act fast. Settlement is atomic when we call recoverKnine(). If you call accept we cannot cancel the deal. Code is law,” the message read.

Shiba Inu developers working with security firms to recover lost funds

Shiba Inu developer Kaal Dhairya wrote a long post on X Saturday, saying the team is working closely with security firms Hexens, Seal 911, and PeckShield to investigate who stole the funds. Dhairya noted the hacker obtained validator signing keys, acquired majority validator power, and then signed a malicious state to siphon tokens from the bridge.

Preliminary analysis shows a flash loan was used to acquire 4.6 million BONE tokens, which temporarily gave the attacker two-thirds of validator voting power on the Shibarium Layer-2 network. 

They made away with 224.5 Ether, valued at about $1.03 million, along with 92.6 billion SHIB worth roughly $1.27 million. Doge Killer (LEASH), Shiba Inu’s TREAT, and Shifu (SHIFU), were also scooped up in the attack, although they have not yet been moved.

“Because the BONE was delegated to Validator 1, it is locked, giving us the chance to freeze those funds,” the developer wrote.

According to Cryptopolitan’s incident report on the matter, the attack began from a compromised checkpoint where a fraudulent Merkle root was inserted. Etherscan shows that after this malicious root was added, the attacker first drained $1 million through a large transaction.

Ten out of twelve validator signing keys were compromised, allowing the hacker to approve a malicious root state and extract the assets. Only validators operated by K9 Finance and UnificationUND did not sign the state update.

K9 Finance has since blocked the wallet holding stolen KNINE tokens to prevent the attacker from selling them. Shibarium developers also paused staking and unstaking to stop the bloodshed through validator control.

“Authorities have been contacted. However, we are open to negotiating in good faith with the attacker: if the funds are returned, we will not press any charges and are willing to consider a small bounty,” Dhairya surmised, asking the hacker to come forward with the funds.

SHIB records price jump before tanking 7%

After the events of the exploit spread on social media and news publications, the broader Shiba Inu ecosystem was rattled, sparking sell-offs in its tokens. Shiba Inu’s SHIB token first spiked to $0.0000148 at around 01:30 PM UTC Saturday, then fell steeply to $0.0000137 in the next 24 hours, a 7.4% downtick.

At the time of this publication, SHIB is trading at $0.0000131, 5% below highs recorded in the last day. Its market capitalization has also shot downwards 5.26% to $7.72 billion. 

K9 Finance token (KNINE) dropped 11%, sliding from $0.00000287 to $0.00000257. The attacker’s wallet, spotted by Web3 research platform Tikkala security, now holds $637,000 worth of KNINE, nearly $70,000 less in value compared to Saturday due to the price slump.

ShibaSwap’s governance token BONE was hit the hardest, tumbling 38% from $0.31 on Sunday morning to $0.1928. 

Markets have responded negatively to the news of Shibarium’s exploit, where Dogecoin, which had enjoyed a brief rally over the weekend, dropped by nearly 10% and is struggling to hold above $0.26.

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