BetterBank Drained $5M in Basic DeFi Exploit After Ignoring Audit Warnings

Source: BetterBank Rekt

What Happened?

After just six weeks of operation, BetterBank’s "revolutionary" DeFi platform was exploited for $5 million due to a glaring design flaw. The attacker took advantage of the bonus minting system originally created to reward traders with a simple but effective method:

• Created fake liquidity pairs (LPs) using BetterBank’s FAVOR token on PulseX.
• Performed bulk swaps to harvest unlimited ESTEEM token bonuses.
• Converted these infinite rewards into real assets while bypassing the tax mechanisms.

This exploit wasn’t technically complex; it was basic liquidity pool manipulation that any security researcher could have spotted. The critical mistake? BetterBank’s smart contracts couldn’t distinguish between legitimate and counterfeit LPs. The tax logic applied only to “official” pairs, leaving fake LPs completely untaxed and open for infinite bonus extraction.

The Money Trail

Investigation uncovered that the attacker’s wallet was initially funded via Tornado Cash-indicating planned execution rather than opportunistic theft.

• Three custom smart contracts were deployed that coordinated the exploit.
• Loot was converted into ETH, bridged to Ethereum, and cycled through Tornado Cash for laundering.
• Surprisingly, over half of the stolen funds were returned later, an unusual move in hostile DeFi hacks. This sparked speculation about possible negotiation or “white hat” involvement.

Ignored Audit Warnings

BetterBank’s auditor, Zokyo, flagged this exact type of exploit months before launch: fake tokens creating fake LPs to drain the protocol. Despite detailed warnings, BetterBank dismissed the risk-citing demo test conditions that showed negative yields as justification to avoid fixing the issue.

This gap between audit advice and team decisions left the door wide open and ultimately led to real user losses of $5 million.

Odd Patterns and Unanswered Questions

• The platform’s short lifespan-long enough to build meaningful TVL but short enough to avoid deep user scrutiny.
• The partial return of stolen funds contrasts with typical hacker behavior, suggesting possible behind-the-scenes dealings.
• Founders’ backgrounds include quiet or dormant projects, raising questions about their experience and commitment.
• BetterBank remains active, issuing public statements and engaging with their community despite the setback.

Key Takeaways

• DeFi exploits often stem from fundamental design oversights, not advanced hacks.
• Auditors’ warnings are crucial and ignoring them risks millions in losses.
• Fake LPs and token economics loopholes remain a common attack vector.
• Communication failures-between auditors, developers, and users-can worsen damage.
• Partial fund returns don’t always signify goodwill; sometimes they’re strategic moves.

BetterBank’s crash is a stark reminder that in DeFi, the line between security and disaster is razor-thin-and sometimes, human judgement fails as much as technology.