A Developer’s Bypass Dooms Nemo Protocol to $2.6M Smart Contract Collapse

Nemo Protocol, a decentralized finance (DeFi) yield platform, suffered a $2.6 million exploit on September 7, 2025, due to the deployment of unvetted code by a developer who bypassed internal review processes. The post-mortem report from the platform detailed that the breach stemmed from two critical vulnerabilities: a flash loan function incorrectly exposed as public and a query function that could modify contract state without authorization. The exploit allowed attackers to siphon stablecoins from the market pool, with stolen funds bridged to Ethereum via Wormhole’s CCTP. Security firm PeckShield first flagged the incident, noting that $2.4 million was currently held in the hacker’s address.

The root cause of the exploit can be traced to January 2025, when a developer submitted code containing unaudited features to MoveBit auditors. The developer failed to highlight new additions while mixing previously audited fixes with unreviewed functionality, leading MoveBit to issue a final audit report based on incomplete information. The same developer then deployed contract version 0xcf34 using a single-signature address rather than the audit-confirmed hash, bypassing internal review protocols. Asymptotic team had previously identified critical vulnerabilities in August, but the developer dismissed the severity and failed to implement necessary fixes despite available support.

Attack execution began at 16:00 UTC on September 7, with hackers exploiting the flash loan function and the `get_sy_amount_in_for_exact_py_out` query vulnerability. Nemo’s team detected anomalies thirty minutes later when YT yields displayed over 30x returns. The incident highlights the risks associated with unvetted code in DeFi smart contracts, particularly when internal governance processes are not followed. The developer’s secret deployment of code in late 2024—intended to enhance composability through flash loan capabilities—critically underestimated security risks and incorrectly used public methods instead of internal functions, creating the primary attack vector.

The compromised code also included functions that were supposed to be read-only but were coded with write capabilities, further exposing the platform to manipulation. The developer integrated unaudited features into the final codebase after receiving MoveBit’s initial audit report. The mixed version contained both fixed issues and new unaudited features without explicit scope highlighting. This lack of transparency and adherence to security best practices created the conditions necessary for the exploit to succeed.

In response, Nemo Protocol has suspended all smart contract activity and is conducting an ongoing investigation. The platform has not yet disclosed the root cause but has confirmed that vault assets remain secure. The exploit coincided with a planned maintenance window for the Nemo App, which the platform says will share more details once the inquiry progresses. Meanwhile, the incident underscores the broader vulnerabilities in DeFi platforms that rely on third-party audits and internal governance without sufficient oversight. As the crypto industry continues to evolve, incidents like these highlight the need for stricter code verification protocols and multi-signature deployment standards to prevent similar exploits in the future.

The Nemo Protocol exploit is the latest in a series of high-profile DeFi breaches in 2025, including a $41 million hack at SwissBorg and a $1.55 million exploit that led to the shutdown of Kinto. These incidents collectively emphasize the growing sophistication of cybercriminals targeting the DeFi ecosystem. As DeFi platforms expand their functionalities to include complex financial instruments and cross-chain integrations, the risk of undetected vulnerabilities in smart contracts also rises. The current incident serves as a cautionary tale for other DeFi protocols to prioritize rigorous code audits and enforce multi-layered security checks before deploying new features.