The Evolving DeFi Threat Landscape
The May 28, 2025, Cork Protocol exploit didn’t just steal $12 million—it exposed a dangerous evolution in DeFi attacks. By combining sophisticated smart contract manipulation with privacy-enabled fund laundering, this breach signals a paradigm shift. Attackers now weaponize protocol composability itself.
Cork’s design as an on-chain insurance platform for depeg risks using Uniswap v4 hooks made it a prime target. But the real shock came on June 25: The attacker laundered 4,520 ETH through Tornado Cash and donated 10 ETH to the legal fund of its indicted developers. This move wasn’t just technical. It was ideological.
For DeFi security teams, the implications are stark: Audits failed with four audits missing critical hook authorization flaws. Laundering resurged as Tornado Cash, despite its 2024 sanctions lift, remains a top threat actor tool. Attack sophistication reached new levels as hackers exploited cross-market token dependencies—a flaw buried in Cork’s core logic.
This incident isn’t isolated. It reflects a broader trend where attackers exploit economic assumptions as ruthlessly as code vulnerabilities. As DeFi integrates complex primitives like derivatives and hooks, security must evolve beyond signature-based alerts. We need adversarial thinking that anticipates how protocols break when composable parts collide.
Cork Protocol Mechanics: How the Architecture Enabled the Exploit
Cork Protocol wasn’t just another yield platform. It pioneered on-chain depeg insurance using Uniswap v4’s customizable hooks—a feature that became its critical flaw. Let’s dissect the components attackers exploited.
Core Components & Their Vulnerabilities
Tokenized Risk Instruments included the Redemption Asset as stable collateral, the Pegged Asset as volatile pegged asset, the Depeg Swap as insurance token paying out if depeg occurs, and the Cover Token as yield-bearing token absorbing depeg risk. The flaw was that the protocol allowed DS tokens from legitimate markets as RA inputs in new markets. This enabled cross-contamination between pools.
The Peg Stability Module as the engine converting RA into DS/CT pairs had no validation for “imported” DS tokens. Attackers weaponized this to inject tainted assets.
Uniswap v4 Hook Integration via Cork’s CorkHook managed pool callbacks but omitted critical safeguards: missing onlyPoolManager modifier on beforeSwap() and no reentrancy locks on redemption functions. The result was direct external calls manipulating state logic.
The Fatal Design Choice
Cork treated all DS tokens as equal—regardless of origin. When the attacker acquired legitimate weETH-DS tokens from Market A, used them as RA collateral to create Fake Market B, and minted fraudulent wstETH-DS tokens in Market B, the protocol couldn’t distinguish real versus spoofed instruments. This allowed draining Market A’s wstETH reserves.
Audits missed this because four audit firms focused on individual market logic, none tested cross-market composability attacks, and hook authorization checks weren’t in scope for three of four audits.
Attack Timeline & Fund Flow: The $11M Extraction
The attacker executed with surgical precision. Here’s how $12M in wstETH vanished in 16 minutes—and became untraceable ETH weeks later.
Key Events
At 2025-05-28 11:23 UTC, the exploit triggered via malicious hook call stealing 3,761 wstETH. Between 11:25–11:39 UTC, wstETH was converted to 4,530 ETH across DEXs. On 2025-06-25 03:17 UTC, 2,260 ETH moved to Tornado Cash. At 03:41 UTC, another 2,260 ETH went to Tornado Cash. Finally at 04:03 UTC, 10 ETH was donated to Tornado Cash dev legal fund.
Laundering Tactics
The attacker employed 28-day dormancy where funds sat in virgin wallets to evade chainalysis heuristics. They used smurfing withdrawals with Tornado Cash outputs split into 112+ transactions to avoid exchanges’ AML thresholds. The legal fund donation served as an ideological fingerprint—mimicking Lazarus Group’s 2023 Ronin exploit.
Tornado Cash was chosen because sanctions were lifted in November 2024 when a U.S. court ruling overturned OFAC sanctions, enabling U.S. entity usage. Its irreversible privacy through non-custodial design and ZK-proofs breaks forensic tracing. Liquidity resurgence saw post-sanction TVL grow 320% in 2025, making large withdrawals untraceable.
Technical Exploit Breakdown: The 5-Stage Attack
The Cork Protocol attack wasn’t a single vulnerability exploit—it was a surgical chain reaction across multiple protocol layers. Security teams must dissect each phase to build effective defenses.
Stage 1: Weaponizing Legitimate Markets
The attacker acquired 3,760.88 weETH8CT-2 tokens via a flash swap against Cork’s wstETH:weETH market. These Cover Tokens became the entry point for draining reserves.
Stage 2: Malicious Market Creation
Using a custom contract, the attacker deployed a fraudulent market with manipulated parameters: Redemption Asset as legitimate weETH8DS-2 tokens from the victim market, Pegged Asset as wstETH, and counterfeit DS/CT tokens. The critical flaw was that Cork’s design permitted DS tokens as RA inputs—enabling cross-market contamination.
Stage 3: Hook Manipulation
The attacker directly called beforeSwap() in Cork’s Uniswap v4 hook, bypassing PoolManager checks due to missing access control modifiers. This allowed spoofing 3,761 weETH-DS deposits and forging fake DS/CT tokens via malicious exchangeRateProvider data.
Stage 4: Cross-Market Arbitrage
With counterfeit tokens minted, the attacker redeemed fake_DS + fake_CT for legitimate weETH8DS-2 in the fraudulent market. These were combined with previously acquired CT tokens to drain 3,761 wstETH from the legitimate market via 1:1 redemption.
Stage 5: Evasion & Laundering Preparation
Within 16 minutes, the attacker converted wstETH to ~4,530 ETH across DEXs and let funds sit for 28 days to evade blockchain surveillance heuristics.
Tornado Cash’s Resurgent Role in Laundering
On June 25, 2025, the attacker moved 4,520 ETH through Tornado Cash in two transactions—then donated 10 ETH to the legal fund of indicted developer Roman Storm. This wasn’t just money laundering; it was a political statement coinciding with Storm’s July 2025 trial.
Why Tornado Cash?
Sanctions were lifted in November 2024 when an appellate court ruling overturned U.S. Treasury sanctions, declaring Tornado Cash’s immutable smart contracts aren’t legally “property.” Technical obfuscation through zero-knowledge proofs breaks transaction links irreversibly—ideal for large-scale laundering. Liquidity resurgence saw post-sanction TVL surge 320% in 2025, enabling high-volume withdrawals without slippage.
Laundering Tactics
The attacker used smurfing withdrawals with outputs split into 112+ transactions to bypass exchange AML thresholds. Time-delayed obfuscation with a 28-day dormancy period defeated blockchain analytics heuristics tracking “hot” funds. Ideological signaling through donation to Storm’s defense fund mirrored Lazarus Group’s tactics, blending criminal pragmatism with crypto-anarchist symbolism.
The security takeaway is clear: Delisted does not mean safe. Despite sanctions removal, OFAC still tracks mixer activity—especially DPRK-linked flows.
Root Causes & Protocol Vulnerabilities
Cork’s $12M loss stemmed from converging technical and economic flaws—a textbook case of DeFi composability risk.
Critical Security Failures
Access control gaps enabled direct beforeSwap() execution via hook. Token validation failure allowed cross-market DS token acceptance as RA. Audit blind spots saw four audits miss hook authorization issues. Singleton pool risk meant commingled assets across markets.
Why Audits Failed
Scope limitations meant three audits focused solely on individual market logic, ignoring cross-protocol interactions. Hook neglect occurred as Uniswap v4 callback security was deemed “out of scope” for auditors. Assumption bias led auditors to assume DS tokens couldn’t be weaponized as collateral—a fatal economic oversight.
The hacker’s taunt appeared in on-chain messages blaming audit firms while detailing the exploit mechanics.
Mitigation Strategies for DeFi Security Teams
Code-Level Defenses
Enforce require(msg.sender == poolManager) in Uniswap v4 callbacks to prevent direct execution. Implement registry-based whitelisting that blocks DS tokens as RA inputs. Add time-locks during contract expiry transitions to prevent premium manipulation.
Architectural Controls
Deploy separate vaults for each insurance market to contain compromises. Freeze redemptions exceeding 5% of pool reserves within one block using behavioral circuit breakers. Mandate two-of-three signed price feeds for derivative valuations through oracle diversification.
Laundering Countermeasures
Integrate real-time alerts for mixer deposits—even post-sanctions. Adopt Bybit’s API model for instant attacker address blacklisting. Deploy ML models flagging “smurfing” clusters like 100+ sub-$100K transactions from fresh wallets.
Hardening the DeFi Immune System
The Cork Protocol exploit wasn’t just a $12M heist—it was a masterclass in adversarial DeFi engineering. By weaponizing token interoperability and Uniswap v4 hooks, the attacker exposed how composability multiplies risk. Their laundering via Tornado Cash—and donation to its developers—added ideological insult to injury.
Three Imperatives for Security Teams
Treat hooks as critical infrastructure: Uniswap v4’s customizability demands standardized security audits for all callback logic. Assume economic sabotage: Design protocols to withstand not just code exploits, but incentive manipulations like fake market creation. Build laundering resilience: Integrate chain-agnostic threat feeds and real-time mixer monitoring into incident response playbooks.
The attacker’s $24K donation to Tornado Cash’s legal fund underscores crypto’s unresolved tension: privacy versus accountability. As protocols adopt increasingly complex primitives, security teams must champion defense-in-depth—where economic logic, code integrity, and fund tracing form layered bulwarks against the next paradigm-shifting exploit.
Final threat intelligence update confirms the attacker’s 4,520 ETH remains dispersed across 112+ wallets. No centralized exchange withdrawals have been detected. Blockchain analysts confirm the funds are moving through privacy-focused DeFi pools.
