USPD Stablecoin Breached: Hackers Exploit Proxy Deployment Vulnerability in Multi-Million Dollar Attack

Another day, another crypto exploit—this time a stablecoin gets a brutal stress test courtesy of a clever vulnerability. The USPD stablecoin protocol was compromised, with attackers exploiting a critical flaw in its proxy deployment mechanism. The breach highlights the persistent security gaps that haunt even foundational DeFi infrastructure.

Anatomy of a Hack: The Proxy Pitfall

The attack vector wasn't a flashy zero-day, but a subtle architectural weakness. The vulnerability resided in the proxy contract deployment logic—a common pattern used for upgradability. Hackers manipulated the initialization process, bypassing security checks and gaining unauthorized control over core protocol functions. It's a stark reminder that complexity is the enemy of security, especially when billions in 'digital gold' are managed by a few lines of buggy code.

The Aftermath: Trust Evaporates Faster Than Liquidity

While the exact figures are still emerging from the on-chain forensics, the exploit drained significant value from the protocol. The immediate result? The stablecoin's peg wobbled under the sell pressure as users scrambled for exits—proving once again that in crypto, 'stable' is a relative term when the code fails. The incident triggered a cascade of liquidations and left the project's treasury looking decidedly anemic.

Security Theater or Wake-Up Call?

The DeFi community is conducting its usual post-mortem: audits failed, governance was slow, and the bug bounty was apparently not big enough. This exploit cuts to the heart of a systemic issue: the industry's relentless rush to ship product often outpaces rigorous security practices. It's the financial innovation equivalent of building a skyscraper without a foundation inspection—spectacular until it isn't.

Here's the cynical finance jab: In traditional markets, it takes a boardroom full of suits years to misappropriate this much value. In crypto, a solo hacker with a sharp eye can do it before their coffee gets cold. The USPD breach isn't an anomaly; it's a feature of an ecosystem that prizes permissionless innovation over bulletproof stability. Until that calculus changes, keep expecting these headlines—and maybe don't park your life savings in the latest algorithmic money market.

Details of the attack

The breach took place on September 16 during the deployment of USPD’s proxy system. USPD.io said the attackers used a method called CPIMP (Clandestine Proxy In the Middle of Proxy). They executed a ‘Multicall3’ transaction to gain administrative rights before the deployment script had finished.

3/ Instead, we were targeted by the highly sophisticated "CPIMP" (Clandestine Proxy In the Middle of Proxy) attack vector.

On Sept 16, during deployment, an attacker front-ran our proxy initialization via a `Multicall3` transaction, silently seizing admin rights before our…

Once they had control, the attackers set up a “shadow” implementation. This hidden version forwarded calls to the legitimate, audited contract while altering storage slots and event data. 

Because of this, blockchain explorers such as Etherscan showed the verified contract as normal, hiding the attackers’ control. Using this hidden access, they upgraded the proxy, minted roughly 98 million USPD tokens, and drained around 232 stETH from the protocol.

Response from USPD.io

USPD.io said it is working closely with law enforcement and whitehat security groups to recover the stolen funds. The attacker’s addresses have been flagged with major centralized and decentralized exchanges to prevent further movement. 

The addresses involved are 0x7C97313f349608f59A07C23b18Ce523A33219d83 and 0x083379BDAC3E138cb0C7210e0282fbC466A3215A.

The team also offered the attacker a chance to return the funds. USPD.io said that if 90% of the stolen assets are returned, all law enforcement action WOULD be halted. Attackers can keep 10% of stolen funds as a bug bounty. The team described this as a potential whitehat rescue.

In a statement, USPD.io said: “We are devastated that despite rigorous audits and adherence to best practices, we fell victim to this emerging and highly complex attack vector. We are doing everything in our power to recover assets.”

A full technical post-mortem is expected to be released soon to explain how the exploit happened and what measures will prevent future attacks.

Implications

The exploit demonstrates just how sophisticated attacks in the crypto space have become. According to USPD.io, the attackers focused on the deployment process rather than the smart contract itself, using proxy manipulation and shadow implementations to remain undetected.

The incident also underscores the value of transparency and fast action. By openly communicating what happened and working with authorities, USPD.io is showing how teams can respond effectively to major security breaches in decentralized finance.

Also Read: Yearn Finance Recovers $2.4M After $9M yETH Exploit Shakes DeFi