Tectonic Still Has $9.19 Million Unrecovered, Plans to Phase Out Low Liquidity Tokens as Collateral

The Cronos lending protocol Tectonic has released a report on the attack incident. On August 30, attackers manipulated the governance token TONIC price to use an inflated valuation as collateral, borrowing nominal assets worth $120.4 million from multiple markets. Cronos subsequently paused the network and rolled back the state. Before the pause, the attackers had cross-chain withdrawn about $9.19 million, which has not yet been recovered. The root cause of the attack was that TONIC could be borrowed and then re-deposited as collateral within the same transaction, with a spot pricing and a collateral rate of 20%, and a lack of limits tied to market depth and checks for rapid price increases. The team plans to gradually phase out low liquidity tokens as eligible collateral and set borrowing limits, with specific details to be announced after the implementation plan is finalized. Currently, the team is working with forensic agencies, law enforcement, stablecoin issuers, exchanges, and cross-chain bridges to recover the funds.

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