Tether Freezes $1.7 Million in Profits From Yearn Finance Hack

By Robert Stevens

US dollar stablecoin company Tether has frozen $1.7 million stolen from decentralized finance protocol yearn.finance yesterday, mitigating some of the $11 million lost in the exploit.

Paolo Ardoino, CTO of Tether, today tweeted that Tether “just froze 1.7M USDt stolen as part of the hack of Yearn DAI v1 vault.” By freezing the assets, the thief cannot use those funds elsewhere.

The exploiter profited $2.7 million by taking out a flash loan from lending protocol Aave and manipulating exchange rates in Curve Finance’s 3pool, a crypto fund in which Yearn Finance’s v1 yDAI vault was heavily invested.

Yearn Finance, a decentralized project that shifts investors’ money around different DeFi protocols to generate high interest rates, managed to stop the exploit in its tracks to prevent the loss of a further $24 million worth of decentralized stablecoin DAI, it wrote in a vulnerability disclosure today.

The exploit was very expensive to pull off; to do it, the exploiter had to pay $3.5 million in liquidity fees to Curve, $3.5 million in staker fees and $1.4 million in fees to Aave, according to a research analyst at The Block, Igor Igamberdiev. 

Igamberdiev said the exploiter profited 513,000 decentralized stablecoin DAI and 1.7 million in USDT. 

Critics of the freeze point out that this means that Tether isn’t decentralized and thus in opposition to the spirit of decentralized finance. “very decentralized, very impressive,” tweeted one smart-alec, “Clever Username 2.”

Ardoino responded, “Freezing assets it's [sic] a preliminary measure to give all the parties the ability to process the events.”

He added that Tether is a “a centralized stablecoin using blockchains as [a] transport layer,” and that Tether must fulfill its duties working with law enforcement agencies and regulators “regarding potential dangerous behavior.” 

This is not the first time Tether has frozen assets from an exploit. After the hack on crypto exchange KuCoin this past September, in which $203 million was stolen, Tether froze $22 million worth of the cryptocurrency. 

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