Briefing
The USPD stablecoin protocol has suffered a critical security breach identified as a “Clandestine Proxy In the Middle of Proxy” (CPIMP) attack, resulting in the draining of its collateral pools and a complete compromise of the token’s supply mechanism. This sophisticated exploit allowed an attacker to seize administrative control during the contract’s initial deployment phase, installing a malicious, hidden implementation that remained dormant for months. The primary consequence is the unauthorized minting of approximately 98 million USPD tokens, which the attacker leveraged to drain over $1 million in stETH collateral from the protocol’s liquidity pools.
Context
The prevailing attack surface in DeFi is shifting from pure logic bugs in audited code to flaws in the deployment and governance pipeline, particularly within upgradeable proxy architectures. Prior to this incident, the risk of “front-running” contract initialization → a critical window where administrative keys are set → was a known, yet often overlooked, vulnerability in standard proxy patterns. This class of vulnerability highlights that even rigorous smart contract audits are insufficient if the protocol’s deployment security posture is not equally hardened against adversarial transaction ordering.
Analysis
The core system compromised was the protocol’s proxy contract administration during its initial setup via a Multicall3 transaction. The attacker executed a front-running transaction that preemptively initialized the proxy, allowing them to seize admin rights before the legitimate deployment script could complete its sequence. With unauthorized admin access, the attacker secretly installed a malicious “shadow implementation” contract which cleverly forwarded all standard calls to the legitimate, audited contract, effectively camouflaging the breach from explorers and auditors for an extended period. This hidden control was then used to call a privileged function, minting 98 million unauthorized USPD tokens and subsequently draining the underlying 232 stETH collateral.
Parameters
- Total Funds Lost → $1,000,000 – The estimated value of drained assets, primarily stETH collateral.
- Exploit Vector → CPIMP Attack – A “Clandestine Proxy In the Middle of Proxy” attack targeting deployment initialization.
- Unauthorized Mint → 98,000,000 USPD – The number of stablecoins minted by the attacker to facilitate the collateral drain.
- Stolen Collateral → 232 stETH – The primary asset drained from the protocol’s liquidity pools.
Outlook
The immediate mitigation step for all users is the urgent revocation of all token approvals granted to the USPD contract to prevent further asset draining from user wallets. This incident establishes a new best practice → protocols utilizing upgradeable proxies must implement hardened, non-front-runnable deployment frameworks to ensure that initialization and admin key assignment are atomic and secure. The CPIMP vector poses a significant contagion risk to other protocols that rely on similar standard proxy deployment patterns, necessitating a systemic review of all deployment scripts across the DeFi ecosystem.
