Moonwell Suffers Approximately $1.78 Million in Bad Debt Due to Oracle Configuration Error

Odaily News DeFi lending protocol Moonwell has incurred approximately $1.78 million in bad debt due to an oracle configuration error. After Moonwell activated Chainlink's OEV wrapper contract via governance proposal MIP-X43 on February 15th, a critical misconfiguration occurred in the price oracle for cbETH, which at one point valued it at only $1. On-chain trading bots and liquidators quickly took action, seizing cbETH collateral by repaying debts of around $1.

This configuration error led to the liquidation of a total of 1,096.317 cbETH, wiping out the vast majority of collateral for many borrowers and leaving the protocol with a significant amount of bad debt. The Moonwell team immediately reduced the cbETH borrowing and supply caps to 0.01 to limit further losses upon discovering the issue, but the official team has currently declined to comment further on the source of the error or the details of the vulnerability.