Moonwell incurs approximately $1.78 million in bad debt due to oracle misconfiguration

Techub News reports, according to Decrypt, the DeFi lending protocol Moonwell incurred approximately $1.78 million in bad debt due to an oracle configuration error. After Moonwell enabled Chainlink's OEV wrapper contract via governance proposal MIP-X43 on February 15, a severe misconfiguration occurred in the price oracle for cbETH, temporarily valuing it at only $1. On-chain trading bots and liquidators quickly acted, seizing thousands of dollars worth of cbETH collateral by repaying debts of around $1. This configuration error led to the liquidation of 1,096.317 cbETH in total, wiping out most or all of many borrowers' collateral and leaving the protocol with significant bad debt. The Moonwell team immediately reduced the cbETH borrowing and supply caps to 0.01 upon discovery to limit further losses, but a spokesperson declined to comment further on the source of the error or details of the vulnerability.