Cork Protocol Loses $12 Million in DeFi Security Breach

Cork Protocol, a decentralized finance (DeFi) platform, recently suffered a significant security breach resulting in a loss of approximately $12 million. The exploit involved the theft of 3,762 wrapped staked Ether (wstETH), which was swiftly converted into 4,530 ETH by the attacker. This incident highlights critical security gaps and the need for more robust audit processes within the DeFi ecosystem.

The attack occurred on May 28, 2025, when an address suspected to be linked to one of Cork Protocol’s infrastructure service providers executed a malicious smart contract. This contract was specifically designed to exploit vulnerabilities within Cork’s smart contracts, allowing the attacker to siphon the wstETH and convert it into ETH within minutes. The swift execution of the attack suggests that the attacker had conducted thorough reconnaissance and planned the exploit meticulously.

Upon detecting the unusual transaction pattern, Cork Protocol promptly paused all smart contracts to contain the breach. The platform assured users that other trading pairs and markets remained unaffected. However, this rapid response does not address the underlying issues that allowed the exploit to occur in the first place. The incident raises fundamental questions about the effectiveness of security measures and audit processes within DeFi protocols.

One of the most concerning aspects of this breach is that several vulnerabilities had been previously identified in security audits. These issues, including the improper handling of rebasing tokens like wstETH and the lack of slippage protection in reserve swaps, were known but not adequately addressed. The protocol’s implementation did not accurately track rebasing events, creating exploitable blind spots. Additionally, the absence of slippage protection allowed the attacker to manipulate market conditions and drain value during token swaps.

Another critical oversight involved inadequate input validation in the protocol’s lending and borrowing logic. Parameters such as collateral value, liquidation thresholds, and interest calculations were not tightly controlled, allowing for potential manipulation. These risks are well-documented in DeFi protocol design, and Cork Protocol appears to have underestimated their significance.

Cork Protocol’s breach is part of a broader pattern of costly attacks targeting DeFi platforms. Over the past two years, the sector has faced numerous sophisticated exploits, including flash loan abuse, oracle manipulation, and flawed smart contract logic. While the tools of attack are well-known, the defenses appear slow to adapt. This incident adds to the growing criticism that many DeFi projects prioritize introducing new capabilities over enhancing code security.

The incident underscores the importance of thorough code audits and the need for developers to follow audit recommendations diligently. For Cork Protocol, the presence of unresolved audit findings indicates a gap between identifying problems and implementing solutions. It also highlights the risks associated with relying heavily on audit companies and third-party infrastructure. Protocol teams must conduct comprehensive re-evaluations when adding new features or upgrading existing ones to ensure code security.

The Cork Protocol team has announced plans for a comprehensive post-mortem and potential compensation for affected users. However, the breach has eroded user trust in the platform. This event serves as a reminder for DeFi users, particularly those staking significant amounts in newer or smaller protocols, of the inherent risks involved. Moving forward, Cork Protocol must not only address the immediate issues but also revamp its governance and risk management systems. Transparency will be crucial in rebuilding user confidence, and the post-mortem report will be closely scrutinized by users, developers, and security experts.