"Magic Fails: Abracadabra Loses $1.8M in Third DeFi Security Flaw"

Abracadabra Protocol, a decentralized finance (DeFi) lending platform, has suffered a $1.8 million loss in its third major security breach since early 2024. The incident, which occurred late Saturday night, involved a smart contract vulnerability that allowed an attacker to bypass solvency checks and extract 1.79 million units of the protocol's Magic Internet Money (MIM) stablecoinThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1]. The attack is the latest in a series of exploits that have cumulatively cost the protocol over $21 million since 2024IHOdl – (https://ihodl.com/topnews/2025-10-06/defi-protocol-abracadabra-loses-18m-after-hacker-attack/)^[3].

The attacker leveraged a flaw in a deprecated contract to manipulate the protocol's lending function, enabling the extraction of MIM tokens beyond the collateral thresholdThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1]. Initial funding for the attack came from Tornado Cash, a privacy-focused mixer, and the stolen MIM was later swapped for ETH and sent back to the same mixerThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1]. BlockSec Phalcon, a blockchain security firm, confirmed the attack's methodology, emphasizing the exploitation of outdated codeThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1].

In response, the Abracadabra DAO treasury has initiated a buyback of the affected MIM tokens from the open market using reserve fundsThe CCPress – (https://theccpress.com/abracadabra-hack-magic-internet-money-affected/)^[2]. A contributor under the alias 0xMerlin stated on the protocol's Discord server that the issue has been mitigated and closed, with the DAO treasury awaiting repayment in ETHThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1]. The DAO emphasized that no user funds were impacted by the breachThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1].

The attack highlights persistent vulnerabilities in DeFi protocols, particularly those relying on complex smart contracts. Abracadabra's MIM stablecoin, which has a circulating supply of nearly 44 million tokens, experienced a 16.98% drop in trading volume following the exploitThe CCPress – (https://theccpress.com/abracadabra-hack-magic-internet-money-affected/)^[2]. The protocol's total value locked (TVL) stands at $154 million, but repeated security incidents have raised concerns about governance and risk managementThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1].

This is the third significant breach for Abracadabra since 2024. A January 2024 hack resulted in a $6.4 million loss due to a similar solvency check bypassThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1], while a March 2025 exploit involved a seven-step flash loan attack that drained $13 million in MIMThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1]. The cumulative losses underscore the challenges of maintaining security in decentralized systems, where code audits and real-time monitoring are critical.

Industry analysts and blockchain security experts have reiterated the importance of rigorous smart contract audits and continuous vulnerability assessments. The CCPress noted that the incident reinforces calls for stricter regulatory frameworks and multilateral audits to address systemic risks in DeFiThe CCPress – (https://theccpress.com/abracadabra-hack-magic-internet-money-affected/)^[2]. Meanwhile, the protocol's developers are reviewing internal processes to strengthen security measures and prevent future exploitsThe Block – (https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024)^[1].

The broader DeFi ecosystem faces growing scrutiny as high-profile hacks erode user trust. Abracadabra's repeated breaches exemplify the need for robust governance structures and proactive risk mitigation strategies. As the protocol works to recover from the latest incident, the incident serves as a cautionary tale for DeFi platforms navigating the intersection of innovation and security.