Oracle Error Leaves DeFi Lender Moonwell With $1.8 Million in Bad Debt
A misconfigured oracle on the DeFi platform Moonwell briefly priced Coinbase Wrapped ETH (cbETH) at about $1 instead of its actual value of around $2,200, causing a 99.9% discount. This error, triggered by a DAO governance proposal implementing new Chainlink contracts, resulted from the system using only the cbETH/ETH feed without multiplying by the ETH/USD rate. The incident allowed trading bots and users to exploit cbETH collateral positions, as liquidators repaid minimal debt to claim substantial cbETH and others over-borrowed cbETH at the faulty price, generating additional bad debt. Moonwell's risk management quickly capped borrowing and supply to limit further damage, but the platform was left with approximately $1.78 million in bad debt. Plans for a new governance vote to fix the oracle issue are underway. The event highlights repeated vulnerabilities in DeFi platforms caused by oracle misconfigurations, with similar incidents affecting Ribbon Finance and Makina Finance in recent months.
