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Market Maker Wintermute Loses $15M in Optimism Tokens

Optimism, Ethereum’s scaling solution, lost the equivalent of $15 million in OP governance tokens, CoinDesk reported. The protocol sent the funds to crypto market maker Wintermute, who gave the Optimism team the wrong blockchain address.

A hacker pounced, immediately exploiting the vulnerability. Wintermute CEO Evgeny Gaevoy took responsibility for letting the breach happen.

Even less reason to be optimistic

This is more bad news for Optimism. A few weeks ago, the protocol staged an unfortunate airdrop of the OP token, which caused the price of the token to plummet. Today it has lost another fifth of its value.

What happened?

The Optimism team explained in a recent blog post that the protocol sent 20 million OP tokens to Wintermute about half a month ago when the OP token airdrop was about to begin. The Optimism Foundation Partners Fund was the source of the tokens.

Gaevoy said the money would have been used to “provide liquidity to the OP token when listing on centralized exchanges.” The funds came in the form of a loan.

The address given was not on Optimism

Unfortunately, the market maker gave Optimism the wrong wallet address, creating the opportunity for an attack. The address given was that of an Ethereum and not an Optimism wallet. The funds were supposed to be safe in a multi-signature wallet held by Wintermute.

When Wintermute realized what had happened, they tried to get the funds back, but a hacker beat them to it.

They siphoned off the 20 million tokens in a new Optimism wallet they were holding, withdrew about a million, converted the tokens to ether, and transferred the ether to an unknown address through the Tornado Cash privacy mixer.

The remaining 19 million tokens are still in the hacker’s wallet

The remaining 19 million tokens are still in the cybercriminal’s wallet. They will be able to vote on Optimism community governance proposals until the tokens are removed from that wallet.

Gaevoy said in a statement:

About optimism

Optimism is an L2 blockchain on Ethereum that can process and combine transactions and transmit them back to Ethereum. It features low fees and fast transactions, helping to scale the Ethereum mainnet.