Nemo Protocol Suffers $2.6 Million Exploit from Unaudiated Code Deployment → Security

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Briefing

The Nemo Protocol, a Sui-based DeFi platform, experienced a $2.6 million exploit on September 7, stemming from the unauthorized deployment of unaudited code by an internal developer. This critical security failure allowed an attacker to leverage exposed flash loan functions, which were erroneously configured to modify contract state. The incident severely impacted user trust and led to a substantial decline in the protocol’s total value locked, highlighting profound internal control deficiencies.

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Context

Prior to this incident, the Nemo Protocol’s security posture was undermined by systemic failures in its development and deployment pipeline. A critical vulnerability (C-2) related to unauthorized code modification was identified by auditor Asymptotic in August but was not adequately addressed. The protocol’s reliance on a single-signature deployment mechanism for contract updates represented a significant attack surface, enabling the bypass of standard security reviews and quality gates.

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Analysis

The attack vector originated from a rogue developer’s deployment of an unaudited contract version (0xcf34) via a single-signature address (0xf55c), circumventing established audit-confirmed hash procedures. This malicious code contained flash loan functions, intended for read-only queries, that were incorrectly configured with write capabilities. Attackers exploited these functions at 16:00 UTC on September 7, manipulating contract states to drain $2.6 million in assets. The on-chain forensics confirmed the exfiltration and subsequent laundering via Wormhole CCTP to Ethereum, demonstrating a sophisticated, multi-chain asset movement strategy.

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Parameters

Exploited Protocol → Nemo Protocol
Vulnerability Type → Unaudiated Code Deployment, Flash Loan State Manipulation
Financial Impact → $2.6 Million
Affected Blockchain → Sui Network
Exploit Date → September 7, 2025
Attack Vector Source → Rogue Developer, Single-Signature Deployment
Asset Laundering Route → Wormhole CCTP to Ethereum
TVL Impact → Collapsed from $6.3 Million to $1.57 Million

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Outlook

Immediate mitigation efforts include the implementation of a NEOM debt token program for victim compensation and the migration of remaining assets to secure, multi-audited contracts. This incident underscores the urgent need for all protocols to enforce stringent multi-signature requirements for code deployment and to conduct continuous, independent security audits. The broader ecosystem must now prioritize robust internal controls and developer accountability to prevent similar systemic failures and safeguard user capital from insider threats.

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Verdict

This incident serves as a stark reminder that even with external audits, internal operational security failures, particularly around code deployment and developer controls, pose an existential threat to DeFi protocols.

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