Logo

Menu

Read the FiRM Whitepaper!

Funds Recovered from Hacked Rari Fuse Pools

Edo
Edo

Risk Working Group

transparencyRiskInverse Finance DAOSecurityFedDola

5 min

Cover Image for Funds Recovered from Hacked Rari Fuse Pools

TL;DR: Inverse has so far recovered 6.5M DOLA, and incurred an additional ~$168k of DOLA bad debt. Inverse also intends to continue operating the Fuse Pool 6 Fed as the market is healthy. Our net PnL from operating Fuse Pool Feds (accounting for bad debt) stands at +$127k.

Background


On April 30th, seven of Rari’s Fuse pools were drained for a total of ~$80,000,000. At the time, Inverse had DOLA Feds tied to Fuse Pools 6, 22, 24, and 127 and $8,000,000 DOLA deployed across the four money markets. Rari paused all borrowing for all markets while they investigated the attack and decided on next steps. The possibility that DOLA was bound to incur significant bad debt has been on our minds since.

What followed was almost five months of mostly silence and uncertainty, with early reimbursement talks promising a quick and honorable resolution going nowhere and were ultimately shot down by the Tribe DAO. This brought about many spirited discussions within the crypto space on the governance issues with DAOs, the conflict of interests at play, the silence of VC’s, and the helplessness of some founders trying to do the right thing. In the meantime, crypto prices fell sharply, with Bitcoin and Ethereum dropping over 50% and other collateral assets listed on Fuse Pools suffering significantly worse fates. Many otherwise healthy loans opened prior to the April hack were suddenly irrecoverably underwater, and still many others were on the brink.

Then, in August, renewed talks brought about the possibility of a resolution, advanced by key figures who took to their platforms to drive the conversation home. The culmination was reached last month when TIP-121b, Rari Fuse Hack Repayment plan, passed with overwhelming majority.

Summary


Previously, many of the DOLA borrowers' positions had been underwater, meaning there was no collateral liquidity in the market for a liquidator to claim while paying back the loan. The passing of the repayment plan however meant that borrowers with higher collateral value than loan value were incentivized to pay back their loan - this brought new liquidity into the Rari Fuse markets and presented an opportunity for Inverse DAO.  

The Risk and Treasury working groups have been hard at work, monitoring the state of ‘healthy’ markets, utilizing alerts tracking liquidity of various collaterals (made available by our Analytics working group) in order to perform our own liquidations, and contracting the Feds where/when liquidity has been returned to the market. Executing targeted liquidations has allowed for $302k of the DOLA bad debt to be reclaimed. What remains is $168k of DOLA bad debt, mainly in Fuse Pool 127, which has not yet been recovered due to a lack of liquidity to complete liquidations. It is unlikely there’ll be new liquidity entering the market, but we remain monitoring the pool just in case. We summarize each remaining position below:

  • Fuse Pool 6 borrowers are all in very healthy positions using gOHM collateral (66% LTV). We intend to continue operating the Fuse Pool 6 Fed as the market is healthy.

  • For all intents and purposes Fuse Pool 22 and the Badger Fed are no longer viable and will soon be deprecated. Remaining DOLA supply is being written-off as bad debt.

  • The Fed attached to Fuse Pool 24 was able to fully contract DOLA supply and will therefore be deprecated.

  • Fuse Pool 127 has five active positions. Currently $165,780 DOLA is being written off as bad debt. Remaining funds can be recovered if liquidity returns to the market. We are closely monitoring all open positions as we try to exit this pool as quickly as possible.

Outcome


So far we have recovered almost 82% of DOLA supplied to Fuse Pool Feds. Of the remaining 18%, we deem 88% is healthy and recallable, and 12% is being written off as bad debt which amounts to just over 2% of DOLA supplied to Fuse Pool Feds prior to the Rari exploit. To put this in context, Inverse has profited ~ $295,400 from operating the four Fuse Pool Feds, and Fuse6 Fed stands to bring additional revenue to the DAO so long as the three active positions remain open. A “Fuse Pool Feds Net PnL” table follows:

Please refer to our transparency page for a breakdown of the figures shown above. 


Edo
Edo

Risk Working Group


More Stories

Cover Image for "Liquidity Provider? Earn +30% On Your Stablecoins!”

"Liquidity Provider? Earn +30% On Your Stablecoins!”

Inverse Finance is working hard with Balancer to create a new, flexible, and efficient exchange for DOLA and INV holders. We are initially supporting two incentivized pools on the platform DOLA/INV and DOLA/bb-a-USDand thanks to the efficiency of the incen...

2 min

Nakamomo
Nakamomo

Community Working Group