A misconfigured price oracle on the DeFi lending platform Moonwell caused significant losses over the weekend. The error briefly valued Coinbase Wrapped ETH (cbETH) at approximately $1 instead of its real market price of $2,200, triggering automated liquidations. This resulted in the seizure of over 1,096 cbETH and left the protocol with an estimated $1.78 million in bad debt, according to a forum post by risk manager Anthias Labs.
A pricing glitch on the DeFi lending platform Moonwell led to a multimillion-dollar incident after a misconfigured oracle valued cbETH at just over $1. The error represented a 99.9% discount from the asset’s actual market value of roughly $2,200.
The incident began when a governance proposal enabling new oracle contracts was executed. According to a forum post by risk management firm Anthias Labs, one oracle was misconfigured and failed to correctly price cbETH’s USD value.
The system incorrectly used only the raw cbETH/ETH exchange rate. This caused the oracle to report a price of around $1.12 for cbETH.
Trading bots quickly targeted collateral positions based on the faulty data. Liquidators repaid minimal debt to seize a total of 1,096.317 cbETH, wiping out borrower collateral.
Moonwell stated that its risk manager moved quickly to contain further risk. “Once identified, our risk manager @anthiasxyz moved quickly to reduce the cbETH borrow cap to 0.01 to contain further risk to the protocol,” the team wrote.
The distorted pricing also allowed some users to exploit the system. They supplied minimal collateral to over-borrow cbETH at the artificial price, generating additional bad debt.
The protocol was left with approximately $1.78 million in total bad debt across various markets. A forthcoming governance vote will address the oracle configuration after a required timelock period.
In the post, users circulated images suggesting the flawed proposal was co-authored by an AI model. The platform is the latest DeFi project to face issues from a misconfigured oracle.
In a similar incident in December, Ribbon Finance lost about $2.7 million after a decimal mismatch in an oracle upgrade. Another platform, Makina Finance, was exploited for roughly $4 million via oracle manipulation in January.
