Recently, Flamingo Finance encountered a flash loan attack in a single transaction, a script that is not complicated but precise enough: the attacker first initiated a flash loan through Morpho, instantly borrowing approximately 18 million USDT, and then staked the Curve USDP LP they held into a certain Strategy, deliberately inflating the share price related to VaultYUSDT. During the brief window when the share price of VaultYUSDT was elevated, the attacker quickly redeemed their aUSDT position, repaid the flash loan principal and fees, leaving approximately 345,900 USDT net profit on-chain, equating to a profit margin of about 1.9%. Behind the seemingly low yield is the ability to leverage nearly zero self-owned capital to mobilize a scale of tens of millions in funds, creating share price deviations in a short time and profiting from the price difference. This incident exposed not a bug in a specific function, but the space for manipulation in the complex strategy combinations and the share pricing mechanism of VaultYUSDT in extreme scenarios, where the attack model of combining flash loans and share price manipulation poses a more direct challenge to the security boundary of the entire DeFi ecosystem.
How 18 Million Flash Loan Triggered the Attack
According to AiCoin data, the attacker first initiated a flash loan from Morpho in the same transaction, instantly borrowing approximately 18 million USDT. After obtaining this "temporary fund," the attacker began operations around the Curve USDP LP: during the attack, they staked the Curve USDP LP into a certain Strategy, incorporating this part of the LP into the strategy combination associated with VaultYUSDT. The staking action temporarily inflated VaultYUSDT's reported assets, and then VaultYUSDT recalculated the share price based on the valuation of the strategy's assets, significantly raising the share price; within this window, the attacker redeemed their aUSDT position, cashing out higher value assets based on the artificially elevated share price.
After redeeming aUSDT for excess returns, the attacker used most of the funds to repay the principal and fees of the Morpho flash loan, executing the entire transaction atomically on-chain without needing to lock long-term collateral or invest their own funds, ultimately leaving about 345,900 USDT as net profit. The Curve USDP LP acted as a disposable underlying position, while the Strategy was responsible for accepting and amplifying the weight of this position within the strategy combination. The share pricing mechanism of VaultYUSDT became the lever for profit amplification, and aUSDT served as the receipt for the high-priced redemption; this pathway from flash loans to arbitrage closure illustrates a textbook-level demonstration of the attack paradigm involving nearly zero self-owned funds, price, and share manipulation.
What Vulnerabilities Does the Elevated Share Price Expose?
In this attack pathway, the share price of VaultYUSDT is essentially the net asset value accounting result of "total asset value / share quantity," while the total asset value highly depends on the position values reported by each Strategy. The attacker staked Curve USDP LP into a certain Strategy, allowing this external LP asset to be factored into Strategy assets in a very short time, which VaultYUSDT then aggregated into its overall asset pool, directly pushing up the book price of each VaultYUSDT share. Because the flash loan provided a momentous influx of USDT, such an action of “first inflating LP, then extracting value” could be completed in a single transaction, the share price was artificially elevated within a block without any buffers or risk control measures in place to recognize it as just a temporary, reversible anomalous behavior.
More critically, this manipulation completely bypassed traditional external oracle pricing and instead targeted the internal share valuation rules of the Vault: the Strategy accepts external LP as collateral but the Vault bears responsibility for any “share pricing” outcomes, lacking constraints on the actual risks, liquidity, and holding durations of the LPs. When the attacker redeemed aUSDT at a higher net value after the share price was elevated, the Vault passively dispensed premium assets according to the distorted book price, and the flash loan was repaid at the end of the transaction, leaving behind the profit "overpaid" by the protocol. This combination of “share pricing + external LP collateral” is not uncommon in many complex strategy protocols, and this incident reminds all products using similar structures: as long as the internal accounting logic lacks constraints on short-term anomalous positions, any seemingly reasonable cross-protocol strategy could potentially become an attack vector that can be triggered instantly by a flash loan in extreme scenarios.
Why the Old Trick of Flash Loans Continues to Work
From an industry perspective, "flash loan + price manipulation" remains a high-frequency attack method years later, primarily because it perfectly utilizes two characteristics of DeFi: composability and instant settlement. Flash loans allow attackers to borrow tens of millions of dollars from Morpho and others with almost no self-owned capital, completing a set of complex operations in a single transaction; price manipulation attacks only need to inflate the book value of a certain asset or share in a very short time to force the protocol to settle at a distorted price. In this Flamingo incident, the attacker staked Curve USDP LP into a certain Strategy, inflated VaultYUSDT's share price, then redeemed their aUSDT position, repaid the flash loan, and left approximately 345,900 USDT in profit; this seamless path leaves virtually no reaction space for any protocol relying on “current book price” to make decisions within a block.
The real shortfall often lies at the safety boundaries of complex yield products and combination strategies. Multiple historical incidents have proved that once a strategy involves LP collateral, share pricing, cross-protocol lending, and redemption simultaneously, audits find it difficult to exhaust all interaction paths, and extreme scenario tests hardly cover combinations like "one-time massive flash loan + temporary price distortion." What this Flamingo incident exposed is the potential manipulability in the share pricing mechanism under extreme inputs. The more practical game is that protocol iteration speeds are accelerating, with new strategies and Vaults continually going live, while governance and risk control responses are often lagging behind code updates. Conversely, attackers continue to specialize in old tricks, specifically seeking those seemingly reasonable combinations that have not been thoroughly simulated under extreme conditions, converting hidden structural risks into realizable profits before protocols can tighten constraints.
After the Attack on Flamingo: Points for Participants to Be Aware Of
For users who have already participated in Flamingo, this flash loan attack primarily tears open the gap between "book profits" and "realizable value." The attacker borrowed approximately 18 million USDT through Morpho, staked Curve USDP LP into a specific Strategy, linked to the share pricing of VaultYUSDT, and after raising the share price redeemed aUSDT for a profit of about 345,900 USDT. The precise target was the combination of specific Strategy and VaultYUSDT, which means that LPs and strategy participants in complex strategy areas are more susceptible to having their position values distorted during extreme market conditions; currently available public materials do not indicate any clear remedial plans, compensation schemes, or parameter update details from Flamingo officials, creating a risk exposure in this gap: the APY and net asset values you see might be recalculated or reset in future strategy adjustments, parameter rollbacks, or even patch upgrades, and the profit path is not entirely in the users' hands.
In the absence of clear official statements, users who have already participated need to focus on "chain-watching contracts" rather than just market conditions: first, continuously monitor whether the contracts related to VaultYUSDT and relevant Strategies have been upgraded, whether withdrawals are paused/resumed, or whether any hard constraints such as new whitelists or limits have been added; second, keep an eye on whether the protocol discloses new share pricing calculation formulas, discount coefficients, or changes in oracle sources, as this incident has already demonstrated that leaving manipulable space within share pricing mechanisms will directly impact LPs and strategy participants. For ordinary DeFi users still in the process of selecting protocols, this incident can serve as a screening checklist: prioritize understanding whether the product heavily depends on external LP collateral assets; comprehend how the share price is calculated based on which assets and pathways; check whether the protocol explicitly states protective designs against flash loans at the documentation or contract level, such as time-weighted mechanisms, withdrawal speed limits, or protective logic under extreme conditions, and only after these foundational questions are reasonably answered, delegate funds to products that involve complex share pricing and multi-strategy combinations.
A New Financial Expansion Under the Shadow of DeFi Security
The flash loan attack on Flamingo is merely a microcosm of this round of “new financial” expansion: one side reveals manipulable gaps in the complex strategies and share pricing on-chain during extreme scenarios, while the other continuously layers new risks onto the same financial system through real-world assets and AI narratives. According to a single source, the tokenized silver product thSLVR launched by Theo has already garnered approximately 40 million USD in active silver leasing commitments; this design, which allocates institutional leasing fees to token holders while maintaining commodity exposure, is tying traditional commodity financing closer to on-chain protocols, also bringing custodial risks, legal, and operational risks into an already fragile contract world. During the same period, stocks related to AI computing power leasing overall rose in the early trading session (CoreWeave, Nebius, Oracle, CIFR, CORZ, etc.), as capital scrambles for computing power infrastructure; meanwhile, Mustafa Suleyman, the head of AI at Microsoft, criticized Anthropic for training Claude to mimic consciousness, which may make advanced AI harder to control. According to The Guardian, the UK publisher Reach has trimmed about 220 editorial positions due to reader shifts toward AI-generated summaries. These fragmented signals point towards a reality: code-level security, RWA custody arrangements, and AI-driven content and computing economies are layering into unprecedented systemic complexity. What deserves continuous tracking next is how protocols will address similar flash loan and price manipulation vulnerabilities in practice, the degree to which RWA and DeFi are coupled, and whether the ongoing impacts of AI on the finance and content industries will further amplify this risk structure.
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