EXPLAINED: Orange Finance Falls to Multi-Sig Exploit (JANUARY 2025)

The DeFi space faces another significant security incident as Orange Finance reports an $830,000 exploit on January 8, 2025. The attack, stemming from multi-signature wallet misconfiguration and compromised private keys, highlights critical operational security failures in DeFi protocol management.

Inside The Attack

The exploit didn’t result from smart contract vulnerabilities but rather from critical operational security oversights. The attacker gained control of Orange Finance’s Safe wallet, which was incorrectly configured to allow execution with just a single signature instead of requiring multiple approvals for critical operations. This misconfiguration, combined with compromised private key management, allowed the attacker to:

1. Transfer ERC20 tokens from the Safe wallet
2. Withdraw unclaimed SYK tokens
3. Disable legitimate owners from each vault
4. Replace vault implementations with malicious versions
5. Drain approximately $780,000 in deposited assets and $47,000 from excessive approvals

The Protocol’s Response

Orange Finance has taken immediate action by:

• Temporarily pausing Stryke, securing 50% of the Total Value Locked
• Disabling deposits and withdrawals through the Orange UI
• Collaborating with Seal 911 for incident investigation
• Attempting to negotiate with the attacker for fund recovery

Update on User Losses (17 Jan 2025)

Orange Finance has now published a detailed breakdown of all affected users and their losses in a comprehensive spreadsheet that outlines:

• Individual wallet addresses affected
• Specific vaults impacted
• Deposit losses in USD
• Approval-related losses
• Unclaimed SYK reward losses
• Total losses per address

The transparency in reporting helps users understand their exposure while the team continues investigating the root cause and pursuing potential recovery options. Orange Finance commits to providing regular updates on the investigation and will share information about compensation measures as they are developed.

https://x.com/0xOrangeFinance/status/1880180857035714756

Lessons Learned

This incident emphasizes several crucial security considerations for DeFi protocols:

1. Multi-signature Configuration: Proper configuration of multi-sig wallets is essential, ensuring critical operations require multiple approvals.
2. Private Key Management: Robust protocols for private key storage, backup, and access control are fundamental to security.
3. Internal Controls: Implementing comprehensive approval workflows, monitoring systems, and incident response procedures is crucial for operational security.

The industry must learn from these incidents to prevent similar exploits in the future. Proper security measures, including regular audits and operational security reviews, are essential for protecting user funds.

For help in securing your smart contracts against malicious upgrades and other common threats, get in touch with Sentnl at https://www.sentnl.io/contact?modal=consultation