Nemo Protocol Loses $2.6 Million from Unaudited Code Deployment → Security

Close-up view of intricately connected white and dark blue metallic components, forming a sophisticated, angular mechanical system. The composition highlights precise engineering with visible internal circuits and structural interfaces, bathed in cool, ethereal light

A vibrant blue, textured, and porous material forms the base, housing several intricate metallic electronic components. These components are precisely integrated into the organic-like structure, highlighting a blend of natural and technological elements

Briefing

Nemo Protocol, a yield-trading platform on the Sui blockchain, suffered a significant exploit on September 7, 2025. This incident resulted in the loss of $2.6 million in digital assets from its SY/PT liquidity pool. The attack vector involved two critical vulnerabilities → a publicly exposed flash loan function and a query function capable of unauthorized state changes. This event underscores the paramount importance of rigorous code auditing and robust governance mechanisms in safeguarding decentralized finance protocols.

A white and grey cylindrical device, resembling a data processing unit, is seen spilling a mixture of blue granular particles and white frothy liquid onto a dark circuit board. The circuit board features white lines depicting intricate pathways and visible binary code

Context

The prevailing attack surface for DeFi protocols frequently involves vulnerabilities introduced through unaudited code deployments. Nemo Protocol’s reliance on a single-signature address for contract upgrades presented a significant pre-existing risk. This centralized control allowed a developer to introduce new, unaudited features into the codebase, bypassing essential scrutiny.

Intricate metallic components, featuring brushed silver plates and deep blue conduits, interlinked with visible gears and precision mechanisms. The detailed engineering evokes the complex internal workings of a decentralized ledger technology DLT, highlighting its consensus algorithm and underlying cryptographic primitives

Analysis

The incident leveraged two specific system compromises within Nemo Protocol’s smart contracts. An internal flash loan function was mistakenly exposed to the public, allowing uncollateralized borrowing. Concurrently, a flaw in the “get_sy_amount_in_for_exact_py_out” query function permitted unauthorized modifications to the contract’s internal state. The attacker executed a multi-step operation, combining the flash loan capability with the state-modifying query function to manipulate the SY/PT liquidity pool.

This chain of cause and effect enabled the attacker to drain substantial assets. The stolen funds were subsequently moved from the Sui network to Ethereum via the Wormhole CCTP bridge, with the majority residing in a single address.

Jagged, multifaceted crystalline formations in shades of deep blue and vibrant cyan surround a core of detailed silver circuit boards and metallic conduits. This abstract representation visually articulates the convergence of physical mining hardware, such as ASICs, with the abstract principles of blockchain technology

Parameters

Protocol Targeted → Nemo Protocol
Attack Vector → Unaudited Code Deployment, Flash Loan Exploitation, State Manipulation
Financial Impact → $2.6 Million
Blockchain(s) Affected → Sui, Ethereum (via Wormhole CCTP)
Vulnerability Identified → Public Flash Loan Function, State-Modifying Query Function (“get_sy_amount_in_for_exact_py_out”)
Date of Exploit → September 7, 2025
Governance Weakness → Single-Signature Upgrade Address

Smooth white spheres and a central luminous blue disc composed of glowing cubic elements are intertwined with dark blue tubular conduits. Scattered blue particles add a dynamic visual layer to this abstract composition

Outlook

Immediate mitigation steps for users involve exercising extreme caution with DeFi protocols exhibiting centralized upgrade mechanisms. The incident highlights the critical need for multi-signature governance and continuous, independent smart contract audits. This exploit will likely establish new security best practices emphasizing immutable code deployment processes and enhanced pre-deployment vulnerability assessments. Similar protocols must re-evaluate their internal controls and audit pipelines to prevent contagion risk from comparable architectural flaws.

A close-up view reveals a transparent blue module, resembling a core blockchain protocol component, interacting with a bubbly, agitated liquid. Its visible internal mechanisms suggest an active transaction execution engine, while metallic rings could represent critical staking pool gateways or oracle network feeds

Verdict

This incident serves as a definitive case study on the catastrophic financial and reputational consequences stemming from a lapse in fundamental smart contract security practices and governance oversight.

Signal Acquired from → The Block