# Lending Protocol Impermax V3 Drained by Collateral Fee Valuation Flaw ∞ Security

**Published:** 2025-11-16
**Categories:** Security

---

![The image features an abstract, high-tech scene dominated by transparent, angular channels filled with a vibrant blue, textured material and scattered white particles. Several smooth white spheres are visible, some embedded within the blue substance, others resting on or floating near the clear structures, all set against a soft, light background](https://incrypthos.com/wp-content/uploads/2025/09/decentralized-ledger-flow-optimizing-blockchain-protocol-efficiency.jpeg)

![The image displays a stylized, star-shaped crystalline object rendered in brilliant blue, accented with metallic silver components. Its sharp, geometric facets and reflective surfaces create a sense of depth and complexity](https://incrypthos.com/wp-content/uploads/2025/09/Abstract-Starburst-Nexus-of-Decentralized-Ledger-Protocols.jpeg)

## Briefing

The Impermax V3 lending protocol was compromised via a sophisticated flash loan attack that exploited a critical flaw in its [collateral valuation](https://incrypthos.com/news/collateral-valuation/) mechanism. The primary consequence is the creation of significant bad debt, as the protocol’s internal ledger was manipulated to accept vastly inflated uncollected fees from Uniswap V3 LP positions as legitimate collateral. This technical failure allowed the attacker to borrow against non-existent value, resulting in a total estimated loss of approximately $400,000 in liquidity from the V3 pools.

![A detailed perspective showcases sophisticated metallic gears and bearings, intricately positioned within a clear, fluid-filled enclosure. The vibrant blue liquid, teeming with numerous small bubbles, circulates around these precisely engineered components, highlighting their operational interaction](https://incrypthos.com/wp-content/uploads/2025/09/Web3-Infrastructure-Protocol-Mechanics-Decentralized-Liquidity-Flow-Dynamics.jpeg)

## Context

The protocol operates in the high-risk niche of leveraged liquidity provision, a model inherently exposed to complex collateral pricing risks, especially when integrating with V3-style concentrated [liquidity pools](https://incrypthos.com/news/liquidity-pools/). Despite undergoing multiple audits, the specific edge-case involving the discrepancy between uncollected and auto-compounded fees was missed, demonstrating the limits of formal verification against subtle protocol logic flaws.

![A highly detailed image showcases a sophisticated metallic device, featuring a central lens-like element and a lever, enveloped by numerous transparent, bubble-like spheres. Behind this intricate mechanism, a faceted, translucent blue structure is visible against a bright, clean background](https://incrypthos.com/wp-content/uploads/2025/09/Blockchain-Protocol-Engine-Microstructure-Sharded-Transactional-Data.jpeg)

## Analysis

The attack vector began with the attacker taking a flash loan to acquire assets and establish a highly concentrated, low-liquidity position in a Uniswap V3 pool. The attacker then executed dozens of swaps to generate a large volume of uncollected fees on their LP position, which the Impermax V3 contract incorrectly valued as high-quality [collateral](https://incrypthos.com/news/collateral/). By using this inflated collateral value, the attacker borrowed a substantial amount of WETH from the protocol. Finally, the attacker auto-compounded the fees, which reset their valuation to a lower, correct amount, leaving the position with insufficient collateral and the protocol with an immediate bad debt.

![The image displays abstract blue and silver cuboid shapes interconnected with translucent, fluid-like structures and clear tubes. These elements create a dynamic, interwoven composition against a light background](https://incrypthos.com/wp-content/uploads/2025/09/Decentralized-Ledger-Infrastructure-Interoperability-Protocol-Data-Stream-Dynamics.jpeg)

## Parameters

- **Total Loss Value** ∞ $400,000 ∞ The final estimated dollar amount of [liquidity](https://incrypthos.com/news/liquidity/) drained from the V3 pools.

- **Vulnerability Type** ∞ Collateral Valuation Flaw ∞ A logic error in calculating the value of uncollected [fees](https://incrypthos.com/news/fees/) from LP positions.

- **Attack Chain Start** ∞ [Flash Loan](https://incrypthos.com/news/flash-loan/) ∞ The uncollateralized loan used to front-run the market manipulation and execute the exploit.

- **Affected [Network](https://incrypthos.com/news/network/)** ∞ Base ∞ The blockchain network where the V3 liquidity pools were compromised.

![The image displays a sophisticated assembly of transparent blue, wave-like forms intricately intertwined with metallic, ring-shaped components. These elements create a dynamic, interconnected structure against a soft gradient background, emphasizing precision and fluid interaction](https://incrypthos.com/wp-content/uploads/2025/09/Cryptographic-Protocol-Interoperability-Architecture-Distributed-Ledger-Mechanism.jpeg)

## Outlook

The immediate mitigation step for users is to refrain from interacting with any V3 pools until the official remediation is complete, as outstanding debt still poses a risk upon repayment. This incident highlights a critical systemic risk for all leveraged LP protocols, mandating a new security best practice ∞ collateral valuation must strictly use compounded fees, not uncollected, or implement a conservative safety margin for all dynamically valued assets. The contagion risk is low, but the core vulnerability is transferable to any [protocol](https://incrypthos.com/news/protocol/) that leverages Uniswap V3 LP positions without rigorous fee valuation checks.

![A visually striking abstract render features a complex, multi-faceted object composed of clear and deep blue crystalline fragments, centralizing around a core nexus. The intricate, reflective surfaces and sharp geometric edges create a sense of depth and precision against a soft grey background, with blurred elements hinting at a wider network](https://incrypthos.com/wp-content/uploads/2025/09/Cryptographic-Hashing-Algorithm-Multi-faceted-Shard-Data-Integrity-Network.jpeg)

## Verdict

**This [exploit](https://incrypthos.com/news/exploit/) is a definitive warning that complex financial primitives, such as leveraged LP positions, require a zero-tolerance policy for logic discrepancies in collateral accounting, regardless of prior audit status.**

Flash loan attack, collateral valuation, lending protocol, liquidity pool, smart contract exploit, uncollected fees, price manipulation, bad debt, protocol logic, defi risk, Base network, V3 architecture, leveraged LP, fee discrepancy, asset drain Signal Acquired from ∞ <a href="https://medium.com/impermax-finance/impermax-v3-exploit-post-mortem-f4469279075e?utm_source=incrypthos.com&utm_medium=referral&utm_campaign=noo-engine.com" target="_blank" rel="nofollow">medium.com</a> 

## Micro Crypto News Feeds

<a href="https://incrypthos.com/news/collateral-valuation/" class="glossary-item-box">

## collateral valuation 

Definition ∞ Collateral valuation is the process of determining the monetary worth of assets pledged to secure a loan or other financial obligation within decentralized finance protocols. </a><a href="https://incrypthos.com/news/liquidity-pools/" class="glossary-item-box">

## liquidity pools 

Definition ∞ Liquidity pools are pools of digital assets locked in smart contracts, used to facilitate decentralized trading. </a><a href="https://incrypthos.com/news/collateral/" class="glossary-item-box">

## collateral 

Definition ∞ Collateral refers to an asset pledged by a borrower to a lender as security for a loan. </a><a href="https://incrypthos.com/news/liquidity/" class="glossary-item-box">

## liquidity 

Definition ∞ Liquidity refers to the degree to which an asset can be quickly converted into cash or another asset without significantly affecting its market price. </a><a href="https://incrypthos.com/news/fees/" class="glossary-item-box">

## fees 

Definition ∞ 'Fees' are charges paid to facilitate transactions or utilize network services. </a><a href="https://incrypthos.com/news/flash-loan/" class="glossary-item-box">

## flash loan 

Definition ∞ A flash loan is a type of uncollateralized loan that must be borrowed and repaid within a single transaction block on a blockchain. </a><a href="https://incrypthos.com/news/network/" class="glossary-item-box">

## network 

Definition ∞ A network is a system of interconnected computers or devices capable of communication and resource sharing. </a><a href="https://incrypthos.com/news/protocol/" class="glossary-item-box">

## protocol 

Definition ∞ A protocol is a set of rules governing data exchange or communication between systems. </a><a href="https://incrypthos.com/news/exploit/" class="glossary-item-box">

## exploit 

Definition ∞ An exploit refers to the malicious utilization of a security flaw or vulnerability within a protocol, smart contract, or application to gain unauthorized access, steal assets, or disrupt operations. </a>

**Tags:** [Liquidity Pool](https://incrypthos.com/news/liquidity-pool/), [Lending](https://incrypthos.com/news/lending/), [Exploit](https://incrypthos.com/news/exploit/), [Flash Loan](https://incrypthos.com/news/flash-loan/), [Price Manipulation](https://incrypthos.com/news/price-manipulation/), [Fee Discrepancy](https://incrypthos.com/news/fee-discrepancy/)	

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**Tags:** [Amount](https://incrypthos.com/news/amount/), [Asset Drain](https://incrypthos.com/news/asset-drain/), [Bad Debt](https://incrypthos.com/news/bad-debt/), [Base](https://incrypthos.com/news/base/), [Base Network](https://incrypthos.com/news/base-network/), [Collateral](https://incrypthos.com/news/collateral/), [Collateral Valuation](https://incrypthos.com/news/collateral-valuation/), [Contract](https://incrypthos.com/news/contract/), [DeFi Risk](https://incrypthos.com/news/defi-risk/), [Exploit](https://incrypthos.com/news/exploit/), [Fee Discrepancy](https://incrypthos.com/news/fee-discrepancy/), [Fees](https://incrypthos.com/news/fees/), [Flash Loan](https://incrypthos.com/news/flash-loan/), [Flash Loan Attack](https://incrypthos.com/news/flash-loan-attack/), [Lending](https://incrypthos.com/news/lending/), [Lending Protocol](https://incrypthos.com/news/lending-protocol/), [Leveraged LP](https://incrypthos.com/news/leveraged-lp/), [Liquidity](https://incrypthos.com/news/liquidity/), [Liquidity Pool](https://incrypthos.com/news/liquidity-pool/), [Liquidity Pools](https://incrypthos.com/news/liquidity-pools/), [Network](https://incrypthos.com/news/network/), [Network Architecture](https://incrypthos.com/news/network-architecture/), [Price Manipulation](https://incrypthos.com/news/price-manipulation/), [Protocol](https://incrypthos.com/news/protocol/), [Protocol Liquidity](https://incrypthos.com/news/protocol-liquidity/), [Protocol Logic](https://incrypthos.com/news/protocol-logic/), [Risk](https://incrypthos.com/news/risk/), [Smart Contract](https://incrypthos.com/news/smart-contract/), [Smart Contract Exploit](https://incrypthos.com/news/smart-contract-exploit/), [Uncollected Fees](https://incrypthos.com/news/uncollected-fees/), [V3 Architecture](https://incrypthos.com/news/v3-architecture/)

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---

**Original URL:** https://incrypthos.com/security/lending-protocol-impermax-v3-drained-by-collateral-fee-valuation-flaw/
