{"investigation":{"slug":"abracadabra-money","entity_name":"Abracadabra Money","trust_score":28,"severity_base":null,"score_modifier":0,"confidence":0.82,"status":"published","content_type":"investigation","summary":"Abracadabra Money is a multi-chain DeFi lending protocol founded in 2021 that allows users to mint Magic Internet Money (MIM), a USD-pegged stablecoin, using interest-bearing tokens as collateral. The protocol has suffered four significant security incidents between 2022 and 2025, losing over $21 million in aggregate, and its MIM stablecoin has lost its dollar peg on multiple occasions. The protocol is also linked to the Wonderland/Sifu scandal of early 2022, which caused severe reputational and financial contagion across its interconnected 'Frog Nation' ecosystem.","sections":[{"content":"Abracadabra Money is a cross-chain DeFi borrowing and lending platform launched in 2021 by Daniele Sestagalli and a pseudonymous co-founder known as 'Squirrel.' The protocol enables users to deposit interest-bearing tokens — such as Yearn Finance vault tokens and Curve Finance LP tokens — as collateral into isolated lending markets called 'Cauldrons,' which are built atop the BentoBox vault system. Users can then borrow MIM, the protocol's USD-pegged stablecoin, against that collateral. The protocol's native governance token, SPELL, can be staked to earn a share of protocol revenue and is used for governance votes. Abracadabra reached a peak total value locked (TVL) of over $5 billion at the height of the 2021 DeFi bull market before declining sharply. As of early 2026, TVL has fallen to approximately $11 million, a decline of more than 99% from peak.","heading":"Protocol Overview","sources":[{"url":"https://wiki.rugdoc.io/docs/introduction-to-abracadabra-and-mim/","name":"wiki.rugdoc.io","type":"other","credibility":3},{"url":"https://www.gemini.com/cryptopedia/magic-internet-money-mim-crypto-abracadabra-money","name":"gemini.com","type":"other","credibility":3},{"url":"https://defillama.com/protocol/abracadabra","name":"defillama.com","type":"other","credibility":3},{"url":"https://marketrealist.com/p/abracadabra-money-founder-net-worth/","name":"marketrealist.com","type":"other","credibility":3}],"severity":"medium"},{"content":"On January 30, 2024, Abracadabra Money suffered its most prominent security breach at the time: an attacker exploited a precision loss vulnerability in the protocol's Cauldron V3 and V4 smart contracts on Ethereum, draining approximately 2,740 ETH, equivalent to roughly $6.4–6.5 million. The root cause was a rounding error in how the contracts tracked debt. The attacker took a flash loan of MIM tokens from Abracadabra's DegenBox, donated them to BentoBox, and manually repaid the debt of other users by invoking the repayForAll function, driving totalBorrow.elastic to zero. Because of the rounding discrepancy, totalBorrow.base did not reach zero, allowing the attacker to manipulate the insolvency checks and borrow MIM against effectively no collateral. The attack caused MIM to depeg significantly, falling from $1.00 to approximately $0.76 before recovering to around $0.94. Blockchain security firm CertiK confirmed the rounding issue as the exploit vector. Abracadabra's DAO announced a buyback-and-burn program for MIM using treasury funds to attempt to restore the peg.","heading":"January 2024 Exploit — $6.4 Million Cauldron Vulnerability","sources":[{"url":"https://www.theblock.co/post/275072/abracadabra-finance-drained-of-estimated-6-4-million-in-apparent-security-attack","name":"theblock.co","type":"other","credibility":3},{"url":"https://cointelegraph.com/news/abracadabra-s-6-49m-loss-leads-to-mim-stablecoin-destabilization","name":"cointelegraph.com","type":"other","credibility":3},{"url":"https://extropy-io.medium.com/breaking-down-the-6-5m-abracadabra-money-hack-a-detailed-analysis-of-the-cauldron-v4-exploit-44100da10896","name":"extropy-io.medium.com","type":"other","credibility":3},{"url":"https://medium.com/neptune-mutual/how-was-abracadabra-money-exploited-77c6b0701819","name":"medium.com","type":"other","credibility":3},{"url":"https://www.coindesk.com/business/2024/01/30/mim-stablecoin-suffers-flash-crash-amid-65m-exploit","name":"coindesk.com","type":"other","credibility":3}],"severity":"medium"},{"content":"On March 25, 2025, Abracadabra Money suffered its largest single exploit: approximately 6,260 ETH, worth roughly $13 million, was stolen from the protocol's Cauldrons on Arbitrum that were integrated with GMX V2's GM liquidity pools. The attacker exploited a flaw in the interaction between Abracadabra's cauldrons and GMX's OrderAgent contract. By making an intentionally failing deposit into GMX — leaving collateral stranded in the OrderAgent contract — then taking out a loan and pushing their own position into liquidation, the attacker triggered a self-liquidation that wiped their debt while leaving the original collateral claimable. The attacker effectively borrowed against already-liquidated collateral, profiting from liquidation incentives. GMX clarified that its own smart contracts were unaffected and that the vulnerability resided in Abracadabra's cauldrons. Abracadabra offered a 20% recovery bounty on stolen funds and stated it had resources to cover approximately half of the losses immediately, with the remainder to be repaid over subsequent months.","heading":"March 2025 Exploit — $13 Million GMX Flash Loan Attack","sources":[{"url":"https://www.theblock.co/post/348059/hacker-steals-13-million-in-abracadabras-magic-internet-money-seemingly-using-a-flash-loan-attack","name":"theblock.co","type":"other","credibility":3},{"url":"https://www.halborn.com/blog/post/explained-the-abracadabra-money-hack-march-2025","name":"halborn.com","type":"other","credibility":3},{"url":"https://finance.yahoo.com/news/13-million-stolen-abracadabra-money-005501164.html","name":"finance.yahoo.com","type":"other","credibility":3}],"severity":"medium"},{"content":"On October 4, 2025, Abracadabra Money sustained its third major exploit in under two years, losing approximately 1,793,755 MIM and 395 ETH, totaling roughly $1.8 million. The attacker exploited a business logic error in the deprecated Cauldron V4 smart contracts' cook() function. By bundling a borrow action with a rogue action ID 0 in a single transaction, the attacker reset the protocol's solvency-check state variable to its default (zero, meaning no check needed), bypassing the final insolvency validation entirely and drawing out an undercollateralized loan. The stolen MIM was swapped into ETH and routed through Tornado Cash to obscure the trail. Security firm Hacken noted that this exploit repeated a flaw pattern from an earlier fork of the same code, raising questions about whether prior audit findings had been adequately remediated. Abracadabra responded by purchasing 1.79 million MIM from the open market to stabilize the stablecoin. This incident marked the third documented major security breach for the protocol since January 2024.","heading":"October 2025 Exploit — $1.8 Million Logic Error in Deprecated Cauldrons","sources":[{"url":"https://www.halborn.com/blog/post/explained-the-abracadabra-hack-october-2025","name":"halborn.com","type":"other","credibility":3},{"url":"https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024","name":"theblock.co","type":"other","credibility":3},{"url":"https://threesigma.xyz/blog/exploit/mimspell-abracadabra-hack-breakdown","name":"threesigma.xyz","type":"other","credibility":3},{"url":"https://crypto.news/abracadabra-1-8m-hack-repeats-earlier-fork-flaw/","name":"crypto.news","type":"other","credibility":3}],"severity":"medium"},{"content":"Abracadabra Money was one of three interconnected DeFi protocols — alongside Wonderland (TIME) and Popsicle Finance (ICE) — collectively branded as 'Frog Nation' and led by Daniele Sestagalli. On January 27, 2022, on-chain investigator ZachXBT publicly revealed that Wonderland's pseudonymous CFO 'Sifu' was Michael Patryn, co-founder of the collapsed Canadian cryptocurrency exchange QuadrigaCX. Patryn had previously been convicted of identity theft and credit card fraud and had served 18 months in prison. Sestagalli subsequently acknowledged having known Sifu's true identity for at least one month prior to the public disclosure and choosing to continue the working relationship. The revelation caused TIME, SPELL, and ICE tokens to crash by more than 30% intraday. MIM also came under severe selling pressure, with investors fearing contagion and potential treasury liquidation of MIM holdings by Wonderland. The resulting panic contributed to a first destabilization of the Terra UST algorithmic stablecoin, as Abracadabra's Degenbox strategy held leveraged UST positions that were rapidly unwound, estimated at approximately $500 million. Wonderland's DAO subsequently voted to remove Sifu as treasury manager. A second vote rejected Sestagalli's proposal to wind down Wonderland entirely.","heading":"Wonderland/Sifu Scandal and Frog Nation Contagion (2022)","sources":[{"url":"https://www.coindesk.com/tech/2022/01/27/how-did-a-former-quadriga-exec-end-up-running-a-defi-protocol-wonderland-founder-explains","name":"coindesk.com","type":"other","credibility":3},{"url":"https://www.coindesk.com/markets/2022/01/27/wonderland-rattled-after-cofounder-tied-to-alleged-quadrigacx-190m-exit-scam","name":"coindesk.com","type":"other","credibility":3},{"url":"https://pontem.network/posts/wonderland-time-and-mim-scandal-what-you-need-to-know","name":"pontem.network","type":"other","credibility":3},{"url":"https://rekt.news/sifu-scandal","name":"rekt.news","type":"other","credibility":3},{"url":"https://www.vice.com/en/article/crypto-co-founder-revealed-to-be-infamous-fraudster-investors-shaken/","name":"vice.com","type":"other","credibility":3}],"severity":"medium"},{"content":"Abracadabra's Degenbox strategy allowed users to deposit UST (TerraUSD) into the protocol, borrow MIM against it, convert MIM back to UST, and redeposit in a recursive loop — achieving up to 10x leverage on stablecoin yields sourced from Anchor Protocol's advertised 20% APY on Terra. At peak, approximately 90% of UST in Degenbox was bridged to Terra and deposited into Anchor. The strategy offered headline APYs as high as 100%, attracting large capital inflows. When the Wonderland/Sifu scandal broke in January 2022, mass unwinding of these leveraged positions — estimated at approximately $500 million in UST — contributed to downward pressure on both MIM and UST and to an early stress test of Terra's peg mechanism. During the full Terra/LUNA collapse in May 2022, Abracadabra's Degenbox positions were again a significant source of systemic liquidation pressure. MIM subsequently dropped to a low of $0.914 in June 2022 amid roughly $12 million of bad debt recognized by the protocol, partly attributable to the Terra ecosystem collapse.","heading":"Degenbox Strategy and UST/Terra Exposure","sources":[{"url":"https://thedefiant.io/maximum-yield-for-stablecoins-degenbox-by-abracadabra-money","name":"thedefiant.io","type":"other","credibility":3},{"url":"https://finance.yahoo.com/news/abracadabra-offer-supercharged-stablecoin-yields-182722381.html","name":"finance.yahoo.com","type":"other","credibility":3},{"url":"https://www.techdreams.org/crypto-currency/abracadabra-impact-on-ust/12009-20211222","name":"techdreams.org","type":"other","credibility":3},{"url":"https://crypto.uk.com/index.php/2022/06/19/defi-protocol-abracadabras-stablecoin-mim-briefly-slides-to-0-91-during-the-crypto-market-rout/","name":"crypto.uk.com","type":"other","credibility":3}],"severity":"medium"},{"content":"When FTX collapsed in November 2022, Abracadabra was materially exposed because FTT — FTX's native exchange token — represented approximately 33% of collateral backing outstanding MIM loans, with a total locked value of roughly $120 million and a liquidation threshold of $6.76 per FTT. As FTT's price collapsed, MIM briefly lost its dollar peg, falling to approximately $0.95 before recovering. Abracadabra disclosed the bad debt situation and outlined a recovery plan calling for approximately 5% of outstanding bad debt to be repaid monthly over a 20-month period, prioritizing maintenance of liquid capital reserves. The protocol ultimately reduced outstanding bad debt from approximately 12.5 million MIM to under 8.5 million MIM through targeted repayment actions.","heading":"FTX Contagion and FTT Collateral Exposure (November 2022)","sources":[{"url":"https://www.coindesk.com/markets/2022/11/08/abracadabras-mim-stablecoin-briefly-lost-dollar-peg-as-ftxs-ftt-token-tanked","name":"coindesk.com","type":"other","credibility":3},{"url":"https://finance.yahoo.com/news/abracadabras-mim-stablecoin-briefly-125435169.html","name":"finance.yahoo.com","type":"other","credibility":3}],"severity":"medium"},{"content":"In July 2023, Abracadabra's core team proposed a significant governance restructuring: transitioning the protocol from a DAO model to a centralized legal entity, citing regulatory scrutiny as a key driver. The proposal called for SPELL token holders to vote on a jurisdiction (with Switzerland, Singapore, Malta, and Bermuda as candidates) and establish a legal wrapper that would handle intellectual property and operational expenses while nominally preserving token-holder voting rights. The proposal was described by the team as 'protecting decentralization' through formal legal structure. No confirmed SEC or CFTC enforcement action specifically targeting Abracadabra Money or the SPELL token has been documented in publicly available regulatory filings as of the time of this report. The SEC's 2024 action against 'Abra' (Plutus Lending LLC) is a distinct entity and should not be conflated with Abracadabra Money. The general DeFi regulatory environment — including the SEC's Wells Notice to Uniswap in 2024 — was cited by Abracadabra's team as motivation for pursuing a legal entity structure.","heading":"Governance and Regulatory Developments","sources":[{"url":"https://www.coindesk.com/business/2023/07/05/centralization-comes-to-defi-as-group-behind-mim-spell-tokens-mull-legal-shakeup","name":"coindesk.com","type":"other","credibility":3},{"url":"https://www.sec.gov/newsroom/press-releases/2024-105","name":"sec.gov","type":"other","credibility":3}],"severity":"medium"},{"content":"Magic Internet Money (MIM) has experienced multiple significant depegging events since its launch. In January 2022, panic selling triggered by the Wonderland/Sifu scandal pushed MIM materially below $1.00. In June 2022, following the Terra/LUNA collapse, MIM fell to approximately $0.914, its lowest recorded price, amid roughly $12 million in protocol bad debt. In November 2022, exposure to FTT collateral during the FTX collapse caused MIM to fall to approximately $0.95. The most severe single-event depeg occurred after the January 2024 exploit, when MIM flash-crashed to approximately $0.76 before partially recovering to $0.94. These repeated depegging events raise structural questions about MIM's resilience as a stablecoin and Abracadabra's risk management practices for accepted collateral.","heading":"MIM Stablecoin Stability Record","sources":[{"url":"https://cointelegraph.com/news/abracadabra-s-6-49m-loss-leads-to-mim-stablecoin-destabilization","name":"cointelegraph.com","type":"other","credibility":3},{"url":"https://www.coindesk.com/business/2024/01/30/mim-stablecoin-suffers-flash-crash-amid-65m-exploit","name":"coindesk.com","type":"other","credibility":3},{"url":"https://crypto.uk.com/index.php/2022/06/19/defi-protocol-abracadabras-stablecoin-mim-briefly-slides-to-0-91-during-the-crypto-market-rout/","name":"crypto.uk.com","type":"other","credibility":3},{"url":"https://www.coindesk.com/markets/2022/11/08/abracadabras-mim-stablecoin-briefly-lost-dollar-peg-as-ftxs-ftt-token-tanked","name":"coindesk.com","type":"other","credibility":3}],"severity":"medium"}],"timeline":[{"date":"2021-05","event":"Abracadabra Money protocol launches, enabling users to borrow MIM stablecoin against interest-bearing collateral.","source":"","date_original":"2021-05-01"},{"date":"2021-11","event":"Protocol reaches all-time high TVL of over $5 billion during the DeFi bull market peak.","source":"","date_original":"2021-11-01"},{"date":"2021-12","event":"Degenbox UST strategy launches, allowing recursive leveraged yield farming on Terra's Anchor Protocol at advertised APYs up to 100%.","source":"","date_original":"2021-12-01"},{"date":"2022-01-27","event":"ZachXBT reveals Wonderland CFO 'Sifu' is Michael Patryn, co-founder of the QuadrigaCX exchange fraud and convicted felon. Sestagalli admits prior knowledge. SPELL, TIME, and ICE tokens crash 30%+. MIM depegs under selling pressure.","source":""},{"date":"2022-01-29","event":"Wonderland DAO votes to remove Sifu as treasury manager. A second DAO vote rejects winding down the protocol, overriding Sestagalli's preference.","source":""},{"date":"2022-05","event":"Terra/LUNA ecosystem collapses. Abracadabra's Degenbox UST positions are force-unwound, contributing to contagion. Protocol accumulates approximately $12 million in bad debt.","source":"","date_original":"2022-05-01"},{"date":"2022-06-19","event":"MIM stablecoin falls to all-time low of approximately $0.914 amid Terra contagion bad debt recognition.","source":""},{"date":"2022-11-08","event":"FTX collapses; FTT, which represented ~33% of MIM collateral (~$120M TVL), crashes. MIM briefly depegs to ~$0.95. Protocol discloses 12.5 million MIM in bad debt and begins 20-month repayment plan.","source":""},{"date":"2023-07-05","event":"Abracadabra core team proposes restructuring the DAO into a centralized legal entity, citing regulatory scrutiny as a key motivating factor.","source":""},{"date":"2024-01-30","event":"Abracadabra suffers $6.4–6.5 million exploit via precision loss vulnerability in Cauldron V3/V4 contracts. MIM flash-crashes to $0.76. DAO announces buyback-and-burn response.","source":""},{"date":"2025-03-25","event":"Abracadabra suffers $13 million flash loan exploit targeting GMX-integrated cauldrons on Arbitrum. Protocol offers 20% recovery bounty. Stolen funds bridged to Ethereum.","source":""},{"date":"2025-10-04","event":"Abracadabra suffers third major exploit in under two years: $1.8 million stolen via business logic error in deprecated Cauldron V4 cook() function. Funds laundered via Tornado Cash. Protocol buys back 1.79M MIM to stabilize peg.","source":""}],"sources_used":[{"url":"https://wiki.rugdoc.io/docs/introduction-to-abracadabra-and-mim/","name":"wiki.rugdoc.io","type":"other","credibility":3},{"url":"https://www.gemini.com/cryptopedia/magic-internet-money-mim-crypto-abracadabra-money","name":"gemini.com","type":"other","credibility":3},{"url":"https://defillama.com/protocol/abracadabra","name":"defillama.com","type":"other","credibility":3},{"url":"https://marketrealist.com/p/abracadabra-money-founder-net-worth/","name":"marketrealist.com","type":"other","credibility":3},{"url":"https://www.theblock.co/post/275072/abracadabra-finance-drained-of-estimated-6-4-million-in-apparent-security-attack","name":"theblock.co","type":"other","credibility":3},{"url":"https://cointelegraph.com/news/abracadabra-s-6-49m-loss-leads-to-mim-stablecoin-destabilization","name":"cointelegraph.com","type":"other","credibility":3},{"url":"https://extropy-io.medium.com/breaking-down-the-6-5m-abracadabra-money-hack-a-detailed-analysis-of-the-cauldron-v4-exploit-44100da10896","name":"extropy-io.medium.com","type":"other","credibility":3},{"url":"https://medium.com/neptune-mutual/how-was-abracadabra-money-exploited-77c6b0701819","name":"medium.com","type":"other","credibility":3},{"url":"https://www.coindesk.com/business/2024/01/30/mim-stablecoin-suffers-flash-crash-amid-65m-exploit","name":"coindesk.com","type":"other","credibility":3},{"url":"https://www.theblock.co/post/348059/hacker-steals-13-million-in-abracadabras-magic-internet-money-seemingly-using-a-flash-loan-attack","name":"theblock.co","type":"other","credibility":3},{"url":"https://www.halborn.com/blog/post/explained-the-abracadabra-money-hack-march-2025","name":"halborn.com","type":"other","credibility":3},{"url":"https://finance.yahoo.com/news/13-million-stolen-abracadabra-money-005501164.html","name":"finance.yahoo.com","type":"other","credibility":3},{"url":"https://www.halborn.com/blog/post/explained-the-abracadabra-hack-october-2025","name":"halborn.com","type":"other","credibility":3},{"url":"https://www.theblock.co/post/373453/abracadabra-loses-1-8-million-in-protocols-third-major-defi-hack-since-2024","name":"theblock.co","type":"other","credibility":3},{"url":"https://threesigma.xyz/blog/exploit/mimspell-abracadabra-hack-breakdown","name":"threesigma.xyz","type":"other","credibility":3},{"url":"https://crypto.news/abracadabra-1-8m-hack-repeats-earlier-fork-flaw/","name":"crypto.news","type":"other","credibility":3},{"url":"https://www.coindesk.com/tech/2022/01/27/how-did-a-former-quadriga-exec-end-up-running-a-defi-protocol-wonderland-founder-explains","name":"coindesk.com","type":"other","credibility":3},{"url":"https://www.coindesk.com/markets/2022/01/27/wonderland-rattled-after-cofounder-tied-to-alleged-quadrigacx-190m-exit-scam","name":"coindesk.com","type":"other","credibility":3},{"url":"https://pontem.network/posts/wonderland-time-and-mim-scandal-what-you-need-to-know","name":"pontem.network","type":"other","credibility":3},{"url":"https://rekt.news/sifu-scandal","name":"rekt.news","type":"other","credibility":3},{"url":"https://www.vice.com/en/article/crypto-co-founder-revealed-to-be-infamous-fraudster-investors-shaken/","name":"vice.com","type":"other","credibility":3},{"url":"https://thedefiant.io/maximum-yield-for-stablecoins-degenbox-by-abracadabra-money","name":"thedefiant.io","type":"other","credibility":3},{"url":"https://finance.yahoo.com/news/abracadabra-offer-supercharged-stablecoin-yields-182722381.html","name":"finance.yahoo.com","type":"other","credibility":3},{"url":"https://www.techdreams.org/crypto-currency/abracadabra-impact-on-ust/12009-20211222","name":"techdreams.org","type":"other","credibility":3},{"url":"https://crypto.uk.com/index.php/2022/06/19/defi-protocol-abracadabras-stablecoin-mim-briefly-slides-to-0-91-during-the-crypto-market-rout/","name":"crypto.uk.com","type":"other","credibility":3},{"url":"https://www.coindesk.com/markets/2022/11/08/abracadabras-mim-stablecoin-briefly-lost-dollar-peg-as-ftxs-ftt-token-tanked","name":"coindesk.com","type":"other","credibility":3},{"url":"https://finance.yahoo.com/news/abracadabras-mim-stablecoin-briefly-125435169.html","name":"finance.yahoo.com","type":"other","credibility":3},{"url":"https://www.coindesk.com/business/2023/07/05/centralization-comes-to-defi-as-group-behind-mim-spell-tokens-mull-legal-shakeup","name":"coindesk.com","type":"other","credibility":3},{"url":"https://www.sec.gov/newsroom/press-releases/2024-105","name":"sec.gov","type":"other","credibility":3}],"source_tags":[],"addresses":[],"reviewed":false,"reviewed_by":null,"model_used":"claude-sonnet-4-6","created_at":"2026-05-30T19:10:47.641601+00:00","updated_at":"2026-08-29T01:34:57.871+00:00"}}