Background
The client — a UK-based technology professional in their 30s — encountered a yield farming platform through a targeted social media advertisement. The platform claimed annual yields of 28-35% on stablecoin deposits and featured what appeared to be a functioning DeFi interface with genuine-looking transaction confirmations. The client deposited incrementally over four weeks before approving what the platform described as a "liquidity optimisation contract" — which was in fact an unlimited spending approval for the attacker's contract.
How the Smart Contract Attack Worked
The platform's website was a convincing replica of a legitimate DeFi protocol with modified contract addresses. The initial deposits appeared to function normally — the client received confirmation transactions and could see their "balance" growing on the platform dashboard.
The critical exploit occurred when the client approved what appeared to be a routine platform interaction. The transaction was in fact a setApproval call granting unlimited token transfer rights to the attacker's contract address for both the client's USDT and ETH holdings.
Within 40 minutes of the approval transaction being confirmed, the attacker's contract executed a drain of the client's wallet — moving $289,000 in USDT and ETH through a series of intermediate wallets before depositing into a centralised exchange.
Our Approach
We decoded the malicious approval transaction and documented the full attack mechanism, identifying the attacker's contract address and the drain transaction chain.
We traced all nine intermediate wallet hops from the drain address to the final exchange deposit, documenting each transfer with block timestamps and transaction hashes.
The final deposit address was attributed to a regulated European exchange through cluster analysis and known exchange address matching.
We submitted a comprehensive forensic package to the exchange's compliance team and simultaneously filed documentation with the UK's Action Fraud and the FCA's intelligence function.
The client's solicitor was briefed with our forensic report to support a potential civil claim, providing parallel pressure alongside the exchange cooperation request.
Challenges We Overcame
- The malicious contract used a proxy pattern that initially obscured the true drain mechanism — additional contract analysis was required to document the full attack chain.
- Three of the nine intermediate wallets interacted briefly with a known mixing service — requiring specialist tracing techniques to follow the fund flow through.
- The exchange's compliance team initially required additional attestation of the client's ownership of the source wallet — we prepared a signed blockchain message proof.
- The 52-day timeline was extended by 12 days due to the exchange's internal legal review process before the freeze was converted to a return.
Outcome
Final Outcome
The full $289,000 equivalent in USDT and ETH was returned to the client's nominated wallet address 52 days after the case was opened. The exchange confirmed that the attacker's account had been suspended and referred to law enforcement. Our success fee was charged as agreed — nothing was owed until the funds were received by the client.
I had clicked "approve" on something without fully reading it and lost everything. The forensic team traced exactly what happened, explained it clearly, and recovered every penny. I could not have done this without them.
Client, United Kingdom (name withheld)
Key Lessons
- Smart contract approvals are one of the highest-risk actions in DeFi. Always verify the exact permissions being granted before signing any approval transaction.
- Even with mixing service interactions, funds remained traceable — mixer usage slows tracing but does not prevent it with proper forensic tooling.
- Parallel tracks — exchange cooperation and legal proceedings — accelerate outcomes compared to a single recovery approach.
- Acting within 24 hours of the drain meant funds had not yet been converted to fiat, which was critical to the successful freeze.