Sonne Finance, a decentralized lending protocol, suffered a significant exploit on Wednesday morning in Asia, resulting in a loss of approximately $20 million. The hacker utilized a known donation attack to breach the protocol, gaining access to $20 million in WETH, Velo (VELO), soVELO, and Wrapped USDC (USDC.e).

According to Sonne Finance's post-mortem analysis, the exploit occurred due to a vulnerability in one of the Compound v2 forks. The team has since halted all Optimism markets as a precautionary measure, while Base markets continue to operate. Blockchain security firm PeckShield alerted Sonne Finance to the issue, prompting a swift response.

The team revealed that they had recently approved a plan to integrate VELO markets into Sonne, which led to the exploit. The hacker executed four transactions after a 2-day timelock, creating markets and adding c-factors. Sonne Finance is currently investigating the identity of the exploiter and has offered a bounty in exchange for the stolen funds. However, the hacker appears to be unwilling to negotiate, transferring $7.8 million of the stolen funds to another wallet address.

The incident highlights the importance of security and vigilance in the decentralized finance (DeFi) space, as hackers continue to exploit vulnerabilities and target vulnerable protocols.