A misconfigured oracle on DeFi lending platform Moonwell briefly priced Coinbase Wrapped ETH (cbETH) at roughly $1 instead of its actual market value of approximately $2,200, triggering a cascade of liquidations that left the protocol with $1.78 million in bad debt.
What Happened: Oracle Mispricing Sparks Liquidations
The error occurred at 6:01 PM UTC on Feb. 15, when a Moonwell DAO governance proposal known as MIP-X43 was executed, enabling Chainlink OEV wrapper contracts across markets on Base and Optimism.
Risk management firm Anthias Labs reported in a forum post Monday that one of the oracles was misconfigured — instead of multiplying the cbETH/Ethereum (ETH) feed by the ETH/USD price, the system used only the raw cbETH/ETH exchange rate, reporting cbETH at around $1.12.
Trading bots quickly targeted cbETH collateral positions.
Because the system valued cbETH at just over $1, liquidators were able to repay roughly $1 of debt to seize a total of 1,096.317 cbETH.
"This wiped out most or all of the cbETH collateral for many borrowers, while leaving substantial bad debt on their positions since the repaid amount was far below the actual borrowed value," Anthias Labs wrote.
A smaller group of users also exploited the distorted pricing to supply minimal collateral, massively over-borrow cbETH at the artificially low price and generate additional bad debt. Moonwell said its risk manager moved quickly to reduce cbETH borrow and supply caps to 0.01 to contain further damage.
Also Read: What Keeps Ethereum Trapped Below $2,000?
Why It Matters: Growing DeFi Oracle Vulnerabilities
The incident adds to a growing record of DeFi projects suffering losses from oracle misconfigurations. In December, Ribbon Finance lost about $2.7 million after a decimal mismatch in an oracle upgrade distorted asset pricing. In January, Makina Finance was exploited via flash-loan-driven oracle manipulation, with an attacker extracting roughly $4 million in ETH.
Moonwell was left with $1,779,044 in total bad debt across various markets.
A forthcoming governance vote will address the oracle configuration following the required timelock period.
Some users on X also noted that MIP-X43 was co-authored by Claude Opus 4.6, with critics describing it as a "vibe coding" error.
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