Critical vulnerability in LULA token: hacker withdraws $578,000 through pool reserve manipulation
An incident occurred on the BNB Smart Chain blockchain, once again demonstrating how dangerous errors in token smart contracts can be. An attacker, exploiting a vulnerability in the LULA token code, managed to withdraw approximately $578,000 from a liquidity pool on the decentralized exchange PancakeSwap. Notably, the exchange itself was not hacked — the attack was directed solely at the token's own logic.
How Reserve Manipulation Works
The attack is based on the recycle() function. This method granted the Rental contract two critical rights: first, to directly withdraw LULA tokens from the PancakeSwap V2 pool, and second, to call the sync() function, which forcibly synchronizes the pair's recorded reserves with the actual (already distorted) balances.
To understand the mechanism, imagine a pool as a scale with two pans: one holds USDT, the other holds LULA. The price is determined by the ratio of volumes. An ordinary trader can only move coins between the pans through swaps. The vulnerability, however, allowed tokens to be removed from one pan from the side, and then "force" the scale to recognize the new position as fair.
The sequence of actions, reconstructed by analysts, is as follows:
- A large swap of USDT for LULA, which inflated the USDT reserve in the pair.
- Multiple calls to
recycle(), reducing the LULA reserve. - A reverse swap of a small amount of LULA, which ultimately "drained" the pool's liquidity.
The point of the maneuver is that the fewer tokens remain on one pan, the more expensive each one becomes. By artificially compressing the volume of LULA in the pair, the attacker exchanged a small number of tokens at a fictitiously inflated rate, receiving significantly more USDT in return.
Preparation Over 12 Days
This attack was not spontaneous. Twelve days before the exploit, the hacker deployed auxiliary contracts to accumulate referral and team rewards. The pre-prepared right to payouts became the entry point: the claimReward() → recycle() chain allowed maximizing the deflationary effect, i.e., compressing the number of tokens in circulation.
For the main stage, a flash loan of approximately $237 million was used. A flash loan works like money borrowed for a few seconds "on good faith": the borrower must repay the amount within the same transaction, otherwise it is entirely reversed. No personal capital is needed for this, making such a tool often used to amplify price manipulations. The borrowed funds were used to withdraw LULA from the DEX pool, enhancing the effect of the recycle() calls.
Expert opinion: This incident is yet another harsh reminder that the audit of token smart contracts must be comprehensive. A vulnerability in a function that initially seems like a harmless utility option can lead to multi-million dollar losses. Investors working with new tokens on DEX should pay attention not only to liquidity and marketing but also to the token's code itself.