Deus DAO's Second Blow: $13.4M Lost After Attacker Outwits the New Muon Oracle

Deus DAO has been hit twice in quick succession. On March 15th, users of the project were liquidated for a combined $3 million. Now, in a painful sequel, the protocol has lost a further $13.4 million.

In a statement acknowledging the exploit, Deus DAO said that:

1. User funds are safe. No users were liquidated

2. DEI lending has been temporarily halted

3. $DEI peg has been restored.

The technique behind this second attack echoed the first — oracle manipulation used to inflate the apparent value of DEI collateral — but the execution this time was considerably more involved.

01A question answered, badly

In our coverage of last month's incident, we asked why Deus DAO hadn't built a more resilient system. Lafayette Tabor's official post-mortem addressed this directly, explaining that the team's integration of Muon's off-chain VWAP oracle was "designed exactly to prevent this". The rollout was confirmed on Discord on March 19th, with the team stating that "Muon oracles are ready and implemented."

Evidently, the upgraded defenses weren't sufficient to stop a repeat.

02How the new oracle was beaten

This exploit was considerably less simple than the first. The attacker had to fool both the off-chain Muon oracle and the on-chain price feed — the same USDC/DEI pool implicated previously.

Muon's oracle tracks activity inside the Solidly USDC/DEI pool to compute a Volume Weighted Average Price. Four minutes ahead of the main attack, a separate preparatory transaction managed to "fake" a swap equivalent to roughly 2 million USDC for 100,000 DEI.

The capital used to fund this manipulation was traced back to an initial withdrawal from Tornado Cash, which was then forwarded to the exploiter's own address, converted into roughly $2 million of USDC, and bridged over Multichain to Fantom (see the outgoing and incoming transactions).

Tabor characterized the technique as "a zero-day exploit on Solidly swaps" — a sequence of flash-swaps executed inside the same pool that produces a distorted price, which the Muon oracle then reads as genuine. He elaborated further via direct message:

"we came to the conclusion it all is based on the fact the muon oracle implementation only used Solidly as a price source, they have been working on upgrading that already.

the swap used flashswap() that wasnt filtered out properly by muon leading to a short term VWAP price glitch…

…Main takeaway based on the whitehackers anlysis is to change muon vwap pricing to filter out obscure swaps and use multiple data sources."

Having set up the Muon oracle manipulation in advance, the attacker executed the primary attack transaction at 02:40 UTC, targeting the same USDC/DEI pool that the lending contract relies on as its on-chain oracle for DEI — following a similar playbook to the first incident.

Credit: Peckshield

03Attack sequence

1: Flashloan 143,200,000 USDC

2: Swap 143,200,000 USDC to 9,547,716 DEI via sAMM-USDC/DEI_USDC_DEI, driving DEI's price artificially high

3: Using just 71,436 DEI as collateral, the attacker borrows 17,246,885 DEI from DeiLenderSolidex, exploiting the inflated price set in step 2

4: Repay the flashloan, banking roughly $13 million in profit

Whereas the earlier attack inflated collateral value purely to trigger liquidations, this time the manipulated collateral was used to borrow funds straight out of the protocol.

04Moving the funds

The proceeds — 5,446 ETH in total, including the capital used to stage the Muon manipulation — moved from the attacker's Fantom address over to its Ethereum counterpart, and from there into Tornado Cash.

Muon oracle manipulation transaction: 0x8589e136e6ad927096d07baa16852d16f11456c0446efb8f1ecd467ce0d4cb10

Main flashloan attack transaction: 0x39825ff84b44d9c9983b4cff464d4746d1ae5432977b9a65a92ab47edac9c9b5

Attacker's address (Fantom): 0x701428525cbac59dae7af833f19d9c3aaa2a37cb

Attacker's address (Ethereum): 0x701428525cbac59dae7af833f19d9c3aaa2a37cb

05Market reaction and next steps

Despite being the second incident to strike the project within two months, DEUS's price recovered to near pre-attack levels after an initial drop of about 20%. DEI has continued trading below its peg since the exploit, though it appears to be gradually stabilizing.

Given that the oracle system was newly built and the swap-based flaw is claimed to have been previously unknown, it's understandable that Armor Labs' audit of Deus's lending product failed to catch it.

Even accepting that the vulnerability may genuinely have been novel, Tabor's own account reveals that the Muon oracle design had two clear shortcomings: it relied on just one price source, and it failed to adequately filter out unusual, "obscure" swaps. The team has said both gaps will now be addressed, and — as it did after the first incident — the protocol will cover the losses, this time drawing on veDEUS funds.

Battle-tested, established oracle designs already exist as alternatives. Innovation has its merits, but the security lessons the industry learned the hard way from flash loan season are there to be used.