Executive summary
From August 26 to 27, 2025, BetterBank, a decentralized finance (DeFi) protocol operating on the PulseChain network, fell victim to a sophisticated exploit involving liquidity manipulation and reward minting. The attack resulted in an initial loss of approximately $5 million in digital assets. Following on-chain negotiations, the attacker returned approximately $2.7 million in assets, mitigating the financial damage and leaving a net loss of around $1.4 million. The vulnerability stemmed from a fundamental flaw in the protocol’s bonus reward system, specifically in the swapExactTokensForFavorAndTrackBonus function. This function was designed to mint ESTEEM reward tokens whenever a swap resulted in FAVOR tokens, but critically, it lacked the necessary validation to ensure that the swap occurred within a legitimate, whitelisted liquidity pool.
A prior security audit by Zokyo had identified and flagged this precise vulnerability. However, due to a documented communication breakdown and the vulnerability’s perceived low severity, the finding was downgraded, and the BetterBank development team did not fully implement the recommended patch. This incident is a pivotal case study demonstrating how design-level oversights, compounded by organizational inaction in response to security warnings, can lead to severe financial consequences in the high-stakes realm of blockchain technology. The exploit underscores the importance of thorough security audits, clear communication of findings, and multilayered security protocols to protect against increasingly sophisticated attack vectors.
In this article, we will analyze the root cause, impact, and on-chain forensics of the helper contracts used in the attack.
Incident overview
Incident timeline
The BetterBank exploit was the culmination of a series of events that began well before the attack itself. In July 2025, approximately one month prior to the incident, the BetterBank protocol underwent a security audit conducted by the firm Zokyo. The audit report, which was made public after the exploit, explicitly identified a critical vulnerability related to the protocol’s bonus system. Titled “A Malicious User Can Trade Bogus Tokens To Qualify For Bonus Favor Through The UniswapWrapper,” the finding was a direct warning about the exploit vector that would later be used. However, based on the documented proof of concept (PoC), which used test Ether, the severity of the vulnerability was downgraded to “Informational” and marked as “Resolved” in the report. The BetterBank team did not fully implement the patched code snippet.
The attack occurred on August 26, 2025. In response, the BetterBank team drained all remaining FAVOR liquidity pools to protect the assets that had not yet been siphoned. The team also took the proactive step of announcing a 20% bounty for the attacker and attempted to negotiate the return of funds.
Remarkably, these efforts were successful. On August 27, 2025, the attacker returned a significant portion of the stolen assets – 550 million DAI tokens. This partial recovery is not a common outcome in DeFi exploits.
Financial impact
This incident had a significant financial impact on the BetterBank protocol and its users. Approximately $5 million worth of assets was initially drained. The attack specifically targeted liquidity pools, allowing the perpetrator to siphon off a mix of stablecoins and native PulseChain assets. The drained assets included 891 million DAI tokens, 9.05 billion PLSX tokens, and 7.40 billion WPLS tokens.
In a positive turn of events, the attacker returned approximately $2.7 million in assets, specifically 550 million DAI. These funds represented a significant portion of the initial losses, resulting in a final net loss of around $1.4 million. This figure speaks to the severity of the initial exploit and the effectiveness of the team’s recovery efforts. While data from various sources show minor fluctuations in reported values due to real-time token price volatility, they consistently point to these key figures.
A detailed breakdown of the losses and recovery is provided in the following table:
| Financial Metric | Value | Details |
| Initial Total Loss | ~$5,000,000 | The total value of assets drained during the exploit. |
| Assets Drained | 891M DAI, 9.05B PLSX, 7.40B WPLS | The specific tokens and quantities siphoned from the protocol’s liquidity pools. |
| Assets Returned | ~$2,700,000 (550M DAI) | The value of assets returned by the attacker following on-chain negotiations. |
| Net Loss | ~$1,400,000 | The final, unrecovered financial loss to the protocol and its users. |
Protocol description and vulnerability analysis
The BetterBank protocol is a decentralized lending platform on the PulseChain network. It incorporates a two-token system that incentivizes liquidity provision and engagement. The primary token is FAVOR, while the second, ESTEEM, acts as a bonus reward token. The protocol’s core mechanism for rewarding users was tied to providing liquidity for FAVOR on decentralized exchanges (DEXs). Specifically, a function was designed to mint and distribute ESTEEM tokens whenever a trade resulted in FAVOR as the output token. While seemingly straightforward, this incentive system contained a critical design flaw that an attacker would later exploit.
The vulnerability was not a mere coding bug, but a fundamental architectural misstep. By tying rewards to a generic, unvalidated condition – the appearance of FAVOR in a swap’s output – the protocol created an exploitable surface. Essentially, this design choice trusted all external trading environments equally and failed to anticipate that a malicious actor could replicate a trusted environment for their own purposes. This is a common failure in tokenomics, where the focus on incentivization overlooks the necessary security and validation mechanisms that should accompany the design of such features.
The technical root cause of the vulnerability was a fundamental logic flaw in one of BetterBank’s smart contracts. The vulnerability was centered on the swapExactTokensForFavorAndTrackBonus function. The purpose of this function was to track swaps and mint ESTEEM bonuses. However, its core logic was incomplete: it only verified that FAVOR was the output token from the swap and failed to validate the source of the swap itself. The contract did not check whether the transaction originated from a legitimate, whitelisted liquidity pool or a registered contract. This lack of validation created a loophole that allowed an attacker to trigger the bonus system at will by creating a fake trading environment.
This primary vulnerability was compounded by a secondary flaw in the protocol’s tokenomics: the flawed design of convertible rewards.
The ESTEEM tokens, minted as a bonus, could be converted back into FAVOR tokens. This created a self-sustaining feedback loop. An attacker could trigger the swapExactTokensForFavorAndTrackBonus function to mint ESTEEM, and then use those newly minted tokens to obtain more FAVOR. The FAVOR could then be used in subsequent swaps to mint even more ESTEEM rewards. This cyclical process enabled the attacker to generate an unlimited supply of tokens and drain the protocol’s real reserves. The synergistic combination of logic and design flaws created a high-impact attack vector that was difficult to contain once initiated.
To sum it up, the BetterBank exploit was the result of a critical vulnerability in the bonus minting system that allowed attackers to create fake liquidity pairs and harvest an unlimited amount of ESTEEM token rewards. As mentioned above, the system couldn’t distinguish between legitimate and malicious liquidity pairs, creating an opportunity for attackers to generate illegitimate token pairs. The BetterBank system included protection measures against attacks capable of inflicting substantial financial damage – namely a sell tax. However, the threat actors were able to bypass this tax mechanism, which exacerbated the impact of the attack.
Exploit breakdown
The exploit targeted the bonus minting system of the favorPLS.sol contract, specifically the logBuy() function and related tax logic. The key vulnerable components are:
- File:
favorPLS.sol - Vulnerable function:
logBuy(address user, uint256 amount) - Supporting function:
calculateFavorBonuses(uint256 amount) - Tax logic:
_transfer()function
The logBuy function only checks if the caller is an approved buy wrapper; it doesn’t validate the legitimacy of the trading pair or liquidity source.
function logBuy(address user, uint256 amount) external {
require(isBuyWrapper[msg.sender], "Only approved buy wrapper can log buys");
(uint256 userBonus, uint256 treasuryBonus) = calculateFavorBonuses(amount);
pendingBonus[user] += userBonus;
esteem.mint(treasury, treasuryBonus);
emit EsteemBonusLogged(user, userBonus, treasuryBonus);
The tax only applies to transfers to legitimate, whitelisted addresses that are marked as isMarketPair[recipient]. By definition, fake, unauthorized LPs are not included in this mapping, so they bypass the maximum 50% sell tax imposed by protocol owners.
function _transfer(address sender, address recipient, uint256 amount) internal override {
uint256 taxAmount = 0;
if (_isTaxExempt(sender, recipient)) {
super._transfer(sender, recipient, amount);
return;
}
// Transfer to Market Pair is likely a sell to be taxed
if (isMarketPair[recipient]) {
taxAmount = (amount * sellTax) / MULTIPLIER;
}
if (taxAmount > 0) {
super._transfer(sender, treasury, taxAmount);
amount -= taxAmount;
}
super._transfer(sender, recipient, amount);
}
The uniswapWraper.sol contract contains the buy wrapper functions that call logBuy(). The system only checks if the pair is in allowedDirectPair mapping, but this can be manipulated by creating fake tokens and adding them to the mapping to get them approved.
function swapExactTokensForFavorAndTrackBonus(
uint amountIn,
uint amountOutMin,
address[] calldata path,
address to,
uint256 deadline
) external {
address finalToken = path[path.length - 1];
require(isFavorToken[finalToken], "Path must end in registered FAVOR");
require(allowedDirectPair[path[0
Source: secureList
Source Link: https://securelist.com/betterbank-defi-protocol-esteem-token-bonus-minting/117822/
