The DeFi protocol Paid Network has been exploited via a vulnerability that allowed an attacker to create millions of new tokens.

On Mar. 5, an unknown hacker exploited Paid Network’s smart contract and created over 59.4 million PAID tokens worth $166 million at the attack time.

The attacker used a compromised private key to the original contract deployer to leverage the smart contract’s upgrade function. The attacker then proceeded to ‘upgrade’ to a new smart contract that had the ability to burn and re-mint tokens.

Soon, the hacker moved on to selling the illicitly-created 2,501,203 $PAID tokens on Uniswap for 2,040.4339 ETH (about $3 million at the time).

The flood of new tokens into the market, as well as intense selling from the hacker, instantly crashed the PAID token price from $2.80 to $0.30 (at the time of publishing).

Even though the development team has denied an inside job, critics in the community have speculated the attack could be a “rug pull.”

Paid Network has announced that it is pulling liquidity from the vulnerable smart contract to prevent further damage. The team is also planning to create a new contract to restore token balances.

Update: On Mar 7, the Paid Network team published a detailed post-mortem report.

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