Sonne Finance, a pioneering decentralized finance (DeFi) protocol operating on the Optimism Mainnet, has been rocked by a devastating exploit, resulting in a loss exceeding $20 million. The attack, suspected to exploit a time-locked contract loophole, has sent shockwaves through the burgeoning DeFi landscape.

Insights from PeckShield, a blockchain security firm, reveal that Sonne Finance fell victim to a meticulously planned attack, exploiting vulnerabilities in the protocol's smart contract infrastructure. Despite proactive security measures, the exploit unfolded, reminiscent of a known donation attack technique associated with Compound v2 forks.

Sonne Finance, known for being the first platform to launch a lending protocol on Optimism, swiftly responded to the breach with an official blog post. The team expressed profound regret over the incident, outlining the sequence of events leading to the exploit. Attackers exploited a two-day timelock feature, strategically manipulating market creation and collateral factors within the protocol.

Despite swift detection and mitigation efforts, the Sonne Finance team acknowledged the loss and initiated an urgent investigation into the perpetrators' identities. Notably, the team commended Seal contributors for their prompt action, salvaging approximately $6.5 million by injecting VELO tokens into affected markets.

The exploit, detected within 25 minutes by Sonne Finance, prompted the immediate suspension of all Optimism markets operated by the protocol. Additionally, the team offered a bounty to the exploiters and refrained from legal action if the misappropriated funds were returned. To contain further damage and protect user assets, Sonne Finance paused all market activities and engaged stakeholders to explore avenues for fund recovery.

The team pledged transparency and accountability, committing to collaborate with external parties to address the aftermath comprehensively.