YAM Finance responded to reports of an exploit involving Inverse Finance, stating that the suspicious transactions were not caused by a contract vulnerability but stemmed from a price distortion linked to LlamaLend’s mechanism.

The clarification follows a report that Inverse Finance may have suffered losses of approximately $240,000, according to blockchain security firm BlockSec.

Alleged “Donation Attack” on LlamaLend

According to YAM Finance, attackers executed a so-called “donation attack” targeting sDOLA within LlamaLend.

The move reportedly pushed the exchange rate from:

~1.188 sDOLA = 1 DOLA
to

~1.358 sDOLA = 1 DOLA

This sharp price shift allegedly triggered widespread liquidations of users who had deposited sDOLA as collateral to borrow crvUSD.

Liquidations Despite Higher Collateral Value

YAM Finance noted that the most unusual aspect of the incident is that an increase in collateral value typically moves borrowers away from liquidation thresholds.

However, in this case:

Nearly all positions using sDOLA as collateral were liquidated

The reason why higher collateral valuation moved users closer to liquidation remains unclear

The team indicated that analysis is ongoing to determine why the mechanism behaved contrary to expectations.

Secondary Effects: sDOLA Gains, DOLA Trades at 1% Discount

The incident also produced secondary market impacts:

Users who held sDOLA without leverage saw roughly 14% paper gains

DOLA is currently trading at approximately a 1% discount to its peg

Some community members have suggested that borrowers consider repaying DOLA debt during the temporary discount window.

BlockSec Flags $240K Loss

Earlier, BlockSec reported that Inverse Finance appeared to have been attacked, with estimated losses around $240,000. The firm suggested the incident may have involved price manipulation related to DOLA, leading to multiple forced liquidations.

BlockSec stated it has contacted the relevant teams for clarification.