The Bunni DEX halted its smart contract operations after an exploit drained about USD 8.4 million across several chains. On-chain analysis and media reports point to manipulation of the Liquidity Distribution Function (LDF), integrated with Uniswap V4, as the primary cause of the breach.
The Incident
On-chain watchers detected unusual movements in multiple Bunni pools that ended with funds aggregated and sent through a cross-chain bridge. These flows prompted the protocol team to stop operations on the affected networks while investigators and community researchers corroborated the pause and began tracing the transactions involved.
On-chain Observations
Forensic traces show a sequence of trades and linked transactions that altered pool behavior and masked the real flow of funds. The attacker used trades of particular sizes to bend allocation rules, followed by rapid swaps and bridging operations that consolidated stolen assets and reduced immediate detectability by common monitoring tools.
How the LDF Was Exploited
The exploitation appears to have relied on incorrect rebalancing math within the Liquidity Distribution Function, which moves liquidity across price ranges to optimize returns for providers. By forcing unintended rebalances of the LDF curve through targeted trades, the attacker was able to misrepresent LP shares and extract value without triggering prompt alerts or obvious on-chain alarms.
Attack Mechanics and Exit Routes
The exploit combined manipulation of the LDF curve with the use of cross-chain bridges to stage and cash out stolen funds. This approach allowed proceeds to be gathered on one chain, bridged to another, and then moved through custodial or non-custodial services and quick swaps that further obfuscated origin and destination.
Response and Ongoing Investigation
The protocol team has kept contracts paused and is urging users to withdraw funds if the interface permits, while on-chain forensic teams and independent auditors trace involved addresses and possible exit points. Coordination with bridge operators and custodians is being prioritized to try to block further outflows and support any potential recovery actions as the investigation continues.
Implications for DeFi Security
This event highlights that innovative liquidity mechanisms like the LDF require formal verification, operational limits and adversarial testing beyond routine audits. Complex automated strategies can deliver higher returns for providers but also introduce new attack surfaces that demand trade-size limits, automatic cutoffs and stronger on-chain governance controls to reduce systemic risk.
Recommendations for Users and Projects
Users are advised to withdraw or avoid interacting with funds exposed to the affected protocol until a full forensic report is published. Projects should adopt rigorous code reviews, regular audits, adversarial testing, explicit operational limits and designated security officers with on-chain authority to respond quickly to emergent vulnerabilities.
Stopping contracts was a necessary immediate action to limit damage, but recovery and prevention will depend on deep forensic analysis and cooperation among the protocol team, auditors, bridge operators and the wider community. The incident underscores the trade-off between DeFi innovation and security and the need for stronger technical and organizational safeguards to scale new liquidity mechanisms safely.
