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

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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.

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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.

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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.

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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

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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.

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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