Blockchain security firm CertiK is working towards a plan to reimburse users affected by a recent exploit that drained almost $2 million from the latter.
Recall that Merlin’s liquidity pool was drained on Wednesday, hours after CertiK audited the protocol’s code. The DEX was conducting the public sale of its native token, MAGE, when an attacker executed the hack.
As CryptoPotato reported, CertiK said an analysis of the event suggested a private key management issue may have led to the incident. The security firm disclosed that it had pointed out a centralization risk in the audit conducted on Monday and recommended that Merlin switches to decentralized mechanisms to avoid single points of key failure.
Upon further analysis, Merlin and CertiK discovered that the hack was an insider job from the protocol’s team. The back-end team implemented a call-action function that gave them power over the contracts and all trading pairs in the liquidity pools.
The developers were also able to manipulate Merlin’s front-end contracts and web host, allowing them to execute several on-chain transactions that drained the public sale.
While CertiK is working out the victim aid fund plan, they have also informed relevant authorities about the incident and the whereabouts of the rogue technical team. The back-end team has been traced to Serbia, Europe, and local authorities have been notified.
The protocol has also recruited on-chain analysts to monitor the movement of the funds. The stolen assets have been tracked to two wallets and were still there at the time of writing.
Meanwhile, CertiK has offered the developers a 20% white hat bounty, urging them to accept it to avoid the wrath of the law.