Chronos and Tektonic Hacked for $75 Million, Bringing Blockchain Operations to a Complete Halt

Crypto.com's blockchain network, Cronos, immediately halted block generation across the entire chain on Sunday following a hacking incident on the DeFi lending protocol Tectonic. Tectonic was the first DeFi lending protocol on the Cronos network and the largest service, accounting for nearly half of the chain's total DeFi deposits. Prior to the incident, Tectonic held approximately $121.7 million in deposits and around $82.7 million in active loans. Tectonic's dominance was overwhelming, with the deposits of Mimas Finance, the second-largest lending protocol, totaling only about $30,000. The attack method was the same as the Mango Markets incident in October 2022, which resulted in approximately $100 million in losses, involving price manipulation and lending. According to on-chain researcher Weilin Li, the attacker inflated the price of the governance token TONIC, which had only about $1.34 million in liquidity, by 100 times in just 20 minutes, and then withdrew a large amount of funds based on the inflated collateral value. The root cause was that Tectonic applied a 20% collateral ratio to its own governance token, which had extremely low liquidity. This meant that the protocol accepted one-fifth of a valuation that the market could not actually sustain. The initial estimate of the losses was $66 million, but this was later revised to approximately $75 million after an additional $8 million was confirmed to have been transferred to addresses controlled by the attacker. Security firm PeckShield also reported a similar figure of approximately $74 million. Separate on-chain analysis estimated the total amount of funds that had left the pool at approximately $119.5 million. Cronos was able to quickly halt the chain because the network operates with a limited set of 100 validators. This helped to contain the damage, but approximately $6 million was transferred to Ethereum via a bridge before the chain was halted, and the remaining approximately $60 million is currently frozen on the Cronos chain. Some of the funds are believed to have been deposited in decentralized exchange pools to avoid being blacklisted, and during this period, approximately $61 million flowed into the largest decentralized exchange on Cronos within 24 hours. As a result of the chain halt, all loans, transactions, and automated positions for regular users, not related to Tectonic, have been suspended. Crypto.com CEO Kris Marszalek stated that the exchange and app are operating normally and that customer funds are safe, and he promised a post-incident analysis report. Tectonic advised depositors not to interact with the protocol until the security checks are completed. This is not the first security incident involving Tectonic; there were previously protocol logic errors in February 2024 and November 2024, resulting in losses of $250,000 and an undisclosed amount, respectively. Neither Cronos nor Tectonic has yet made an official statement regarding the timeline for restarting the chain, the final amount of losses, or whether depositors will be compensated.