Resupply Exploit: 6 Million reUSD Burn Proposed in Recovery Plan

On June 26, multiple blockchain security firms detected suspicious transactions involving Resupply, a decentralized lending protocol. Initial investigations confirmed that the platform had suffered a significant exploit, resulting in a loss of approximately $9.6 million. Resupply quickly confirmed the incident, identified the affected contract within the wstUSR market, and paused operations. The issue was contained, and all other markets within the protocol remained operational.

On June 28, Resupply provided further updates, confirming that the total loss amounted to $10 million. The team released a detailed post-mortem and a structured recovery plan to address the bad debt and support affected users.

Exploit Details: Smart Contract Vulnerability

Resupply, which accepts ERC-4626 vault shares as collateral, was exploited due to a smart contract edge case that went undetected during deployment. In the post mortem, Resupply explained that the attacker targeted a newly launched lending pair (crvUSD-wstUSR) that initially had no deposits in its CurveLend vault.

By donating a large amount of crvUSD and minting a minimal number of shares, the attacker manipulated the vault’s share price to an artificially high level. While the on-chain oracle correctly displayed this inflated price, a rounding issue in the protocol’s exchange rate calculation caused the exchange rate to round down to zero due to Ethereum Virtual Machine (EVM) math limitations.

This flaw allowed the solvency check to pass by default because the Loan-to-Value (LTV) ratio was effectively computed as zero. Using this logic error, the attacker was able to borrow the entire $10 million debt limit with virtually no collateral.

A classic interest rate inflation exploit

@evilcos, founder of blockchain security firm SlowMist, described the incident as a classic interest rate inflation exploit. He explained that the attacker manipulated the price by donating to the Controller contract of a newly created vault. "This causes the exchange rate to drop to zero and thereby bypassing collateral verification. As a result, the attacker was able to borrow a large amount of reUSD with just 1 wei of collateral," he said. He added that the stolen funds have since been swapped to ETH, now valued at approximately $9.5 million. He also confirmed that the hacker’s gas fees were funded via Tornado Cash.

Resupply Proposes Burning 6 Million reUSD from Insurance Pool in Recovery Plan

Resupply’s recovery strategy focuses on resolving the protocol’s bad debt and retaining affected insurance pool participants. The plan consists of two phases.

"At the time of writing, the total outstanding bad debt amount is 7,131,168 reUSD after 2,868,832 reUSD already paid by the Resupply Treasury, Convex Treasury, and C2tP," the team said.

In the first phase, Resupply proposes to burn 6 million reUSD from the Insurance Pool to cover the majority of the outstanding bad debt. The remaining 1.13 million reUSD will be gradually repaid by the DAO using future protocol revenue or potential RSUP over-the-counter (OTC) sales. To expedite the process, the governance vote on this proposal will be conducted over a three-day period, allowing for a swift resolution within the Insurance Pool’s lock-up window.

The second phase introduces the Insurance Pool Retention Program. This program will offer RSUP token rewards to affected insurance pool participants who choose to remain in the pool. Participation is optional, but users who stay will receive a larger share of RSUP emissions. The program will distribute a total of 2.5 million RSUP tokens over the next 52 weeks, primarily from the treasury’s reserves.

OneKey Founder Yishi Criticizes Resupply’s Recovery Plan and Discord Moderation

The recovery plan sparked significant community discussion. Yishi, founder of OneKey and one of the top three investors in the Resupply project, publicly expressed dissatisfaction with how the Resupply team handled the exploit.

He emphasized that the incident was not the result of market conditions but stemmed from a critical technical failure by the development team. Specifically, Yishi pointed to an ERC-4626 inflation bug caused by the failure to burn initial shares during vault deployment. He described this as a preventable internal mistake rather than an external market event.

"In any security incident, the first step should be to investigate the exploit and protect user funds. Instead, the Resupply team’s first reaction was to push losses onto insurance pool depositors, while silencing and mocking those who disagreed," he said.

Yishi argued that the insurance pool should not be used to cover losses resulting from development errors. He explained that the insurance pool was designed to protect against external risks, such as black swan events and market volatility, not protocol-level bugs.

He also asserted that Curve and its stablecoin crvUSD materially benefited from Resupply’s activities and should not distance themselves from the situation. Additionally, Yishi reported being muted in the official Resupply Discord for raising these concerns. He described this response as unacceptable, as it silenced reasonable community feedback and reflected a lack of openness and accountability.

Curve Responds: Resupply Is Not a Curve-Built Project

In response to these criticisms, Curve issued an official statement on June 27. Curve emphasized that although Resupply contributed to the adoption of Curve’s stablecoin (crvUSD) and lending protocol (LlamaLend), it is an independent project not developed by the Curve core team. Curve clarified that its pools and lending markets remained fully secure throughout the incident. Curve users were not affected, and crvUSD maintained its peg without disruption. The team reaffirmed that the security of the Curve protocol was never compromised.

“While Resupply is not made by Curve devs, its creators are very capable and experienced people who are heavily invested in the Curve ecosystem; we are sure that they will do their best to resolve the situation. The affected Resupply insurance pool was designed specifically to cover security incidents like this if they happen,” Curve said.

Curve Founder Michael Egorov Addresses False Accusations and Resupply Exploit

Michael Egorov, founder of Curve, noted that some community members, particularly individuals connected to OneKey, made false accusations during the incident. He explained that the exploit was caused by a highly unobvious bug that went unnoticed by both the Resupply team and leading auditing firms. He stated that seeding ERC-4626 vaults before they are activated is an effective precaution to address even unknown bugs of this nature.

Following the release of Resupply’s post-mortem and recovery plan, Egorov acknowledged that while ecosystem projects like Resupply operate independently in a decentralized environment, they still have a significant impact on both the Curve protocol and his personal reputation.

OneKey Emphasizes Transparency, Denies Links to Curve Controversy

In response to Egorov’s remarks, OneKey issued a statement clarifying that it has never coordinated or incited any attacks against Curve or other projects. The team emphasized its commitment to transparency, open-source development, and traceable community activities. OneKey confirmed that it is taking legal action against individuals spreading false accusations and announced it will discontinue all unofficial badge labels to prevent future misunderstandings.

The team also clarified that Yishi’s involvement with Resupply was a personal investment unrelated to the company. OneKey highlighted its independent security audits, reputable backers, and encouraged users to conduct their own research when participating in DeFi activities.

Community Raises Concerns Over Missing Trace-Back and Bounty Actions by Resupply

Beyond the official statements, community members raised additional concerns. Some pointed out that Resupply has not initiated any trace-back or white-hat bounty efforts to address the incident. At the time of writing, the hacker’s two associated addresses still hold nearly $9.6 million worth of ETH, with no further movement of the funds reported.

The Resupply incident underscores the inherent risks and structural gaps that still exist in DeFi. Unlike traditional banking systems with well-defined protections, DeFi protocols rely heavily on smart contract security and community-driven governance to manage crises.