Cetus begins recovery phase after $160M fund transfer

Sui blockchain’s liquidity provider, Cetus protocol, transferred about $160 million of quarantined funds to a multi-sig wallet following the approval from an on-chain vote. 

The protocol asserted that the successful asset transfer marks a vital step in their recovery phase. In an X post on Saturday, it shared:

With the funds secured, Cetus has officially entered the next phase of the recovery process. Our team is fully mobilized and working around the clock to execute the roadmap we shared earlier — from contract upgrades and liquidity restoration to preparations for relaunch.

– Cetus protocol

Cetus plans to host a Public Twitter Space in June 

Cetus moved the funds to a jointly controlled wallet overseen by itself, the Sui Foundation, and OtterSec. 

Reportedly, the protocol’s recovery plan received much support from the community, and thus, they could transfer the funds successfully and quickly. According to the Sui Foundation, over 90% of validators supported the proposal, prompting an early conclusion to the vote after just four days. 

Currently, transaction details are available to the public and can be independently verified on SuiVision.

Additionally, the liquidity protocol has planned for a Public Twitter Space with the Sui community on June 2, saying it wants to ensure its clients are involved and properly informed. The meeting will touch on the protocol’s hacking incident and recovery trajectory and include a question and answer session.

In its X post, the protocol also assured users that they are working on a safe and complete recovery to ensure they fully restore protocol operations. 

Nonetheless, the protocol hopes to attain full recovery and restart operations within a week. It is still working on a compensation contract, which is set to be reviewed before release.

Once the protocol restarts, all affected liquidity providers will earn back their recovered liquidity, while outstanding losses can be claimed through the compensation contract.

Cetus froze over $160 million of recovered assets

Last week, a hacker stole over $220 million in crypto from Cetus. Shortly after the attack, the protocol offered the hacker a $6 million bounty, hoping to get back about $56 million of stolen ETH. 

The protocol detailed that it contacted the hacker with an offer to return 20,920 ETH and the frozen Sui wallet funds, allowing them to keep 2,324 ETH, roughly worth $6 million. If the hacker accepted the deal, the protocol claimed they would not pursue legal action. However, any attempt to move or obfuscate the stolen assets would start legal proceedings.

Lookonchain later identified the hacker’s wallet address as “0xe28b50”, with nearly 13 million SUI holdings worth about $54 million. It further revealed that the attacker used to launder stolen funds by converting them to USDC and moving them to the Ethereum blockchain, where he swapped them for ETH.

In their post-mortem report on the attack, the Dedaub security firm also revealed that the hacker exploited a weakness in the MSB check mechanism, allowing him to establish oversized positions and manipulate liquidity parameters easily.

Moreover, the firm stated that Cetus and the Sui Foundation managed to freeze most of the stolen funds, about $162 million. However, their move to freeze the recovered assets sparked a massive debate among crypto community members. Decentralization advocates felt like the blockchain’s validators were overstepping their role in trying to control the chain. One user even claimed Sui was “censoring transactions” across the blockchain.