Cetus Protocol Announces Plans to Compensate Traders Following Its Recent Hack

Cetus Protocol may use its own reserves to cover the losses from its recent hack. The DEX lost $223M during one of its most active trading periods, seeking multiple pathways for recovering the funds.

Cetus Protocol, the decentralized exchange (DEX) that was recently hacked for $223 million, announced plans to compensate traders using its own cash and coin treasuries. The protocol is still waiting on the Sui community to vote on a way to move funds from the hacker’s address.

Cetus Protocol may use its own reserves to cover the losses from its recent hack. The DEX lost $223M during one of its most active trading periods, seeking multiple pathways for recovering the funds.

Cetus Protocol announced plans for a conditional recovery, where it will use its own funds while still expecting to regain access to the hacker wallets blacklisted on SUI.

"Since the incident, we have reflected deeply on its impact on our users, partners, and the broader ecosystem. We are deeply sorry and take this responsibility seriously. Today, we want to share a meaningful step in that direction," Cetus stated.

Additionally, the SUI Foundation announced it would support Cetus DEX with a bridge loan to speed up the fund recovery. The secured loan will attempt to compensate for losses in full quickly and will be added to the Cetus treasury. The loan and reserves will cover the funds that have been bridged out of the Sui network and are only partially recoverable in the best of cases.

SUI Foundation has not set aside funds for the frozen assets on its network and may work toward a future solution for on-chain recovery. In that case, the community and validators will have to reach a consensus on the approach to unlocking and moving the funds. The hacker has not responded to the white hat deal offered by Cetus, leading to the next step in asset recovery.

The recent hack analysis revealed the flaw lay with the Cetus Protocol DEX, which used a flawed math library. The hacker could manipulate the price of token pairs, allowing access to the available liquidity. Multiple pairs were affected, with losses of CETUS, SUI, and USDC. A part of the tokens were bridged to Ethereum and can be mixed, while $160M are still sitting in SUI addresses.

Cetus now waits on the SUI community to vote on a way to move the funds from the hacker’s address. SUI has blacklisted the wallets through an emergency validator consensus but has not worked out a way to move the funds.

Even in the case of a negative vote, Cetus will take care to start a fund recovery for liquidity providers and token holders. The significant overlap between the SUI and Cetus communities may lead to a favorable vote and a recovery of funds.

CETUS and SUI recover market prices

SUI itself continues to carry transactions, though its total value locked fell since the incident. SLI TVL slid from $2.13B to $1.74B. The SUI token recovered in the past days from $3.43 to $3.70, but the loss of liquidity from Cetus was felt by the entire protocol.

The impact of Cetus was also felt in overall SUI activity. Active addresses fell from 1.7M daily and are now dipping under $300K. SUI was just breaking out with meme token trading, with Cetus becoming one of the major sources of on-chain activity.

Following the message of the potential recovery, CETUS tokens also rallied, adding 23% within hours to $0.15. CETUS is still down from its quarterly peak above $0.23.

CETUS recovered rapidly in the past day following the announcement of a compensation program. | Source: Coingecko

SUI memes may take longer to recover, as some of the hottest tokens erased most of their value.

SUI is still seen as a strong bet for a potential bull run, given the fast recovery following the hack.