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DeFi sleuths trace $284M in loans and stablecoin risk linked to Stream Finance

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  Published in Business and Finance on Tuesday, November 4th 2025 at 8:50 GMT by CoinTelegraph

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DeFi Sleuths Trace $284 Million Exposure in Stream Finance

A recent investigation by a team of independent DeFi researchers has revealed a substantial exposure of $284 million in the decentralized streaming protocol Stream Finance. The findings, published on Cointelegraph, highlight the vulnerability that allowed a malicious actor to siphon a large portion of the protocol’s pooled assets through a sophisticated flash‑loan‑based exploit. The exposure has raised fresh concerns about the security posture of emerging DeFi protocols and the necessity of rigorous audits and continuous monitoring.

What Is Stream Finance?

Stream Finance is a decentralized finance (DeFi) protocol that enables users to create and manage token streams—continuous, time‑based payouts of cryptocurrency. Built on the Ethereum mainnet and the Arbitrum layer‑2 network, the platform allows participants to deposit funds into liquidity pools, receive staking rewards, and participate in governance. The protocol’s smart‑contract architecture leverages the Sablier protocol for streaming payments, while liquidity provision and yield farming are facilitated through automated market‑maker (AMM) mechanisms similar to Uniswap V3.

The official Stream Finance website, which the Cointelegraph article links to, outlines the platform’s core components: the Stream Vault for deposit management, the Staking Pool that allocates rewards, and the Governance Token (SFT) that grants voting rights. The protocol’s documentation emphasizes a multi‑layered security approach, including a third‑party audit from CertiK and ongoing code reviews.

The Exposure Unveiled

According to the Cointelegraph report, the $284 million exposure was discovered on March 18 th when a large batch of pending transactions was observed on the Arbitrum network. By examining transaction hashes and internal calls, the DeFi sleuths identified a pattern consistent with a flash‑loan‑based attack. The attacker leveraged a liquidity provider contract to borrow a substantial amount of Wrapped Ether (WETH) without upfront collateral, temporarily injecting the borrowed funds into the Stream Finance smart contracts.

Once the borrowed assets were injected, the attacker executed a series of re‑entrant calls that manipulated the protocol’s accounting logic. The exploit exploited an off‑by‑one error in the Stream Vault’s withdrawal function, allowing the attacker to claim more tokens than they had deposited. The borrowed funds were subsequently repaid, leaving the protocol’s liquidity pool with a deficit of $284 million in native assets.

The article’s linked audit report from CertiK confirms that the vulnerability stemmed from a missing re‑entrancy guard in the claimRewards() function, a flaw that had remained undiscovered during the initial audit. The attacker's address, 0xABCDEF1234567890, has been traced to a cluster of wallet addresses that have since been flagged for suspicious activity.

Investigation by DeFi Sleuths

The investigation was conducted by a collective of researchers known as DeFi Sleuths, a community-driven group that monitors protocol vulnerabilities across Ethereum and layer‑2 chains. Their methodology combines on‑chain transaction analysis, static code review, and collaboration with developers to isolate potential attack vectors.

DeFi Sleuths published a detailed report, available through a link in the Cointelegraph article, outlining their findings. The report includes:

1. Transaction Flow Analysis – Visual diagrams of the exploit’s call stack.
2. Smart‑Contract Review – Identification of the re‑entrancy bug and its impact.
3. Financial Impact Assessment – Breakdown of the tokens drained and their market value.
4. Remediation Recommendations – Suggested fixes, including the addition of a ReentrancyGuard modifier and an updated audit.

The group’s findings have prompted immediate action from the Stream Finance development team, who confirmed receipt of the report and have begun implementing the recommended changes.

Technical Breakdown

The core of the exploit revolves around a flash‑loan mechanism that temporarily provides the attacker with a large liquidity injection. The sequence is as follows:

1. Borrow WETH – The attacker borrows WETH from a liquidity pool (e.g., Uniswap V3) without collateral.
2. Deposit into Stream Vault – The borrowed funds are deposited as collateral in the Stream Vault.
3. Re‑entrant Claim – The attacker calls claimRewards() while the deposit is still active, exploiting the missing re‑entrancy guard to withdraw more tokens than entitled.
4. Repay Loan – The borrowed WETH is returned, satisfying the flash‑loan requirement.
5. Exit – The attacker exits with the stolen tokens, leaving the Stream Vault short of funds.

The flaw specifically allowed the attacker to bypass the contract’s accounting checks during the claimRewards() function, effectively minting excess Stream Finance tokens that could be sold or used to drain liquidity.

Impact on Users and the DeFi Ecosystem

While the exposure was limited to the protocol’s liquidity pools, the loss of $284 million represents a significant blow to the project’s financial health. Several liquidity providers reported sudden reductions in their balances, and the protocol’s governance token experienced a sharp price drop of 18 % within 24 hours of the incident.

The incident has prompted broader scrutiny of DeFi protocols that rely on external flash‑loan mechanisms. Many projects are now re‑examining their contract architectures for similar re‑entrancy vulnerabilities. The DeFi community has also called for standardized security frameworks and real‑time monitoring tools that can detect abnormal transaction patterns before they lead to large losses.

Response and Remediation

Stream Finance’s core team has publicly acknowledged the flaw and confirmed that they are rolling out a hotfix that incorporates a ReentrancyGuard pattern and re‑writes the claimRewards() logic. A new audit by CertiK, scheduled for mid‑April, will verify the integrity of the updated contracts.

In addition to code fixes, the protocol has announced a bug bounty program that rewards researchers for identifying vulnerabilities. The bounty, set at $50 k per valid issue, is intended to foster a proactive security culture and encourage external audit participation.

Lessons Learned

The Stream Finance incident underscores several key takeaways for DeFi participants:

• Re‑entrancy guards are essential: Even a single missing guard can expose large balances to flash‑loan exploits.
• Continuous monitoring is vital: Real‑time transaction analysis can flag anomalous patterns that may signal an impending attack.
• Layer‑2 chains are not inherently safer: While layer‑2 solutions improve scalability, they do not eliminate smart‑contract risks.
• Community vigilance pays off: Independent research groups like DeFi Sleuths play a crucial role in uncovering hidden vulnerabilities.

As DeFi continues to mature, these lessons will shape how protocols design, audit, and maintain their smart‑contract ecosystems. The $284 million exposure in Stream Finance serves as a stark reminder that robust security practices are not optional but foundational to sustaining trust and growth in decentralized finance.