Euler lost $197M to a missing check — then the attacker gave it back

Euler was a decentralized lending protocol on Ethereum. Its donateToReserves function had been patched in July 2022 to fix one bug — but the patch left out a health check.

On 13 March 2023, starting at 8:50 UTC, an attacker borrowed around $30 million of DAI in a flash loan, deposited $20 million into Euler, leveraged the position to roughly ten times the deposit, then used donateToReserves to destroy their own collateral while leaving the debt intact — making themselves eligible for liquidation and claiming a liquidation bonus larger than the cost of the donation. About $197 million in USDC, wrapped bitcoin, staked ether and DAI left the protocol; Euler's EUL token fell more than 45 per cent.

What followed was a negotiation. Euler messaged the exploiter on-chain and demanded the return of 90 per cent of the funds within 24 hours, threatening a $1 million reward for information leading to an arrest. The attacker — communicating as 'Jacob' by on-chain messages and email — returned funds in tranches: 3,000 ETH on 18 March, 51,000 ETH on 25 March, apologising on-chain ('I messed up') as the recovery reached about 84 per cent. Along the way, the Lazarus Group tried to counter-exploit the attacker with a malicious decryption link; Euler warned its own exploiter not to open it.

On 3 April 2023 the final tranches came back, and on 4 April Euler announced a full recovery: roughly $240 million returned — more than was taken, because the stolen assets had appreciated during the negotiation. It stood as one of the largest recoveries in DeFi history: the exploit cost the protocol everything for three weeks, and in the end nothing.