Velvet Capital, a decentralized finance (DeFi) asset management protocol backed by Binance Labs, swiftly responded to a potential phishing attack by deactivating its website temporarily. The move aimed to prevent any further unauthorized access attempts and safeguard users' funds.

The Incident: On April 23, members of the crypto community on X (formerly Twitter) reported unusual activity on Velvet Capital's trading platform. Some users attempting to connect to the front-end were prompted to approve their wallet access to the protocol, raising concerns about a potential security breach.

Upon internal investigations, Velvet Capital issued a cybersecurity alert, advising investors to deny all wallet connect requests from the application until further notice. The protocol took the proactive step of deactivating the application to minimize any potential losses for investors.

Vasily Nikonov, the founder of Velvet Capital, announced the website closure on Telegram, stating, "ATTN, don't interact with the Velvet website, we're closing it for maintenance and investigating the issue, we will issue a post-mortem once the issue is solved."

Safeguarding User Funds

Nikonov reassured users that the smart contracts were not impacted and that funds on Velvet were not affected. He advised any affected users to open a ticket on Discord and share the transaction details with the Velvet Capital team for remediation.

Nikonov told Cointelegraph that after investigating the issue and adding precautionary security measures, the site was re-opened, and no users reported any loss of funds.

Blockchain investigation firms Blockaid and Scam Sniffer had confirmed the incident before Velvet Capital's official announcement, further validating the prompt response from the protocol.

The swift action taken by Velvet Capital demonstrates the protocol's commitment to prioritizing user security and safeguarding their funds. By deactivating the website and thoroughly investigating the issue, Velvet Capital mitigated the potential risks associated with the phishing attempt.

Incidents like these highlight the importance of robust security measures and prompt response protocols. Velvet Capital's proactive approach serves as a reminder for all DeFi protocols to remain vigilant and prioritize the protection of user funds.