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Full Sail, a DeFi protocol on the Sui blockchain, is shutting down after an attacker exploited a signing-key vulnerability in Switchboard’s oracle infrastructure to drain approximately $91,000 from three vaults. The attacker manipulated price feeds to roughly 100 times below market value, deposited at distorted rates, then withdrew inflated amounts. Full Sail has disabled new deposits and paused reward claims, pledging to repay community depositors using protocol liquidity and team funds. The same vulnerability affected Virtue Protocol on IOTA, which reported about $455,000 in losses from liquidations of 45 users. Switchboard suspended oracle networks on Aptos, Sui, IOTA, and Movement but has not committed to compensation. Mysten Labs declined Full Sail’s request for financial assistance. Withdrawal instructions for affected users are expected within days.
Key Elements
A decentralized finance protocol on the Sui blockchain is calling it quits after attackers manipulated an oracle to drain roughly $91,000 from its vaults, marking one of the more damaging security failures to hit Move-based ecosystems this year.
Full Sail said it would begin an orderly shutdown, with repayment to community depositors taking priority over all other obligations. The team disabled new deposits and paused liquidity provider reward claims immediately after confirming the breach, which it traced to a signing-key vulnerability in oracle infrastructure operated by Switchboard.
The attack unfolded on August 29, when someone gained the ability to authorize price updates on a live Switchboard feed. According to Full Sail’s account, the attacker inserted a key they controlled into the oracle’s production code, then pushed reported prices down to roughly one-hundredth of actual market value. They deposited into vaults at those distorted rates, let prices snap back to normal, and withdrew far more than they had put in.
Full Sail was emphatic that its own administrative keys were never compromised. The failure, it said, originated upstream inside Switchboard’s infrastructure.
Switchboard confirmed it was examining a potential compromise of its Move-based oracle implementations and suspended operations on Aptos, Sui, IOTA, and Movement as a precaution. The oracle provider supplies DeFi protocols with external data such as asset prices, which smart contracts rely on to execute automated functions.
Broader Fallout
The incident was not confined to Full Sail. Virtue Protocol, a stablecoin lending platform built on IOTA, reported that 45 users were liquidated after an attacker exploited the same Switchboard vulnerability on its network. The protocol put its losses at approximately $455,000, with debt cleared through liquidations triggered by fabricated prices.
Virtue said its liquidation bot operated correctly based on the false prices it received and was not itself compromised. The protocol has frozen borrowing, deposits, withdrawals, liquidations, and flash loans while remediation continues. The incident also impaired collateral backing its VUSD stablecoin.
The table below summarizes the impact across affected protocols:
| Protocol | Blockchain | Reported Loss | Status |
|---|---|---|---|
| Full Sail | Sui | ~$91,000 | Shutting down |
| Virtue Protocol | IOTA | ~$455,000 | Frozen |
| Switchboard | Multiple chains | Upstream security incident | Under investigation |
Note: Full Sail reported three vaults were exploited; Virtue reported 45 users liquidated.
Compensation and Unanswered Questions
Full Sail said it will draw on its own protocol-owned liquidity and team treasury to cover the shortfall. “Repayment to community depositors remains our highest priority, with instructions on claims and withdrawals to follow in the coming days,” the team stated.
Switchboard, by contrast, has not committed to compensating affected users. As of September 1, the oracle provider had not published technical details of how its code failed, the total scope of affected users, or any fix designed to prevent a repeat.
Full Sail also approached Mysten Labs, the organization behind the Sui network, seeking financial assistance. That request was declined. The protocol said the absence of external support would not delay withdrawals or repayments to its users.
Switchboard issued an initial public statement on August 30, advising protocols to consider temporary migration to alternative oracle providers. A more detailed incident report from Full Sail, along with the team’s broader reasoning for winding down, is expected in the coming days.
The episode underscores a persistent vulnerability in decentralized finance: a protocol can be financially sound and still suffer catastrophic losses because of weaknesses in third-party infrastructure it depends on. With two protocols hit by the same oracle failure, scrutiny of security standards across Move-based chains is likely to intensify.
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Source: finance.biggo.com