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Secret Network Axelar exploit drained about $4.67 million after an attacker abused a vulnerable token contract. The attack occurred on June 10. It was found a week later when a cross-chain transfer failed because the related escrow account lacked funds.
Common Prefix said the attacker minted unbacked Axelar-wrapped assets, called saTokens. Those tokens were redeemed through normal channels for real assets held in escrow.
Secret Network Axelar Exploit Moves Funds Across Ethereum
The affected assets included saUSDT, saUSDC, saDAI, saWETH, saWBTC, saWBNB, and sawstETH. The attacker moved the funds through Axelar and Osmosis before bridging them to Ethereum.
Most assets were swapped for Ether through CoW Protocol, Common Prefix reported. Some transfers later reached deposit addresses at KuCoin, ChangeNow, and HitBTC.
The Secret Network Axelar exploit involved an application-level contract. Axelar said its core protocol and Inter-Blockchain Communication, or IBC, were not compromised.
Secret Network is a privacy-focused Layer 1 chain in the Cosmos ecosystem. Axelar connects blockchains for cross-chain transfers. Axelar said the vulnerable contract was not developed, deployed, or maintained by its team.
Missing Check Created Unbacked Tokens
The contract did not verify the source of an inbound transfer before minting saTokens. An attacker-controlled channel could submit forged deposits. The contract then issued tokens without matching collateral.
The attacker redeemed the unbacked assets for real Axelar-wrapped tokens in escrow. The Secret Network Axelar exploit shows that contract flaws can cause bridge losses even when the underlying network remains secure.
Secret Network said its bridge design had moved from an escrow model to a mint model. During that change, two functions that checked transfer sources were removed. The team also said no external audit was requested by Axelar for the integration.
Privacy Layer Delayed Discovery
Secret Network encrypts balances by default. This made the missing collateral harder to spot than a visible pool drain on Ethereum. The shortfall emerged after a routine transfer failed on June 17.
Investigators traced the gap to seven withdrawals made on June 10. The Secret Network Axelar exploit was not detected during the attack. Secret Network said monitoring and emergency pause systems did not stop the transfers.
Axelar rejected claims that its core infrastructure caused the event. It said the flaw was outside Axelar-specific logic and IBC.
Axelar and Squid Disable Connections
Axelar’s emergency committee disabled the Secret and Secret-SNIP connections after the discovery. Cross-chain router Squid also removed Secret from its frontend. Axelar said no other chains, channels, or escrow accounts were affected.
Secret Network said it identified recoverable assets and asked Axelar to freeze remaining funds. Its forum post said Axelar did not pursue that request. Axelar said it was coordinating with exchanges and law enforcement.
Later Axelarscan data cited by The Block showed roughly $672,000 in WBTC, USDC, WBNB, and AXL in the attacker’s wallet.
Bug Was Present Since 2023
Common Prefix traced the missing validation to the contract’s initial deployment in early 2023. A March 5 migration added new features but retained the flaw. The June 10 attacker targeted that updated code.
The Secret Network Axelar exploit is among at least 22 protocol attacks recorded by DeFiLlama during the month.
SCRT and AXL Avoided Direct Impact
Secret Network said its SCRT token was not directly affected. AXL was also not part of the vulnerable contract. Both tokens gained after the disclosure, based on cited market data.
That price move does not remove risks for saToken holders. Secret Network said the affected assets may no longer have full backing.
Conclusion
The Secret Network Axelar exploit came from a missing source check in a minting contract. Fake deposits created redeemable tokens without collateral. Axelar said its core protocol was not compromised, but the case exposed gaps in contract design and monitoring.
Appendix Glossary of Key Terms
Bridge: A system that moves tokens or data between separate blockchain networks.
Escrow: Assets held in reserve to support wrapped tokens or complete transfers.
Infinite Mint Bug: A flaw that allows unauthorized creation of tokens without proper backing.
Inter-Blockchain Communication (IBC): A Cosmos standard for communication between blockchains.
saTokens: Axelar-wrapped assets issued for use on Secret Network.
Smart Contract: Self-executing blockchain code that follows preset rules.
Wrapped Asset: A token that represents an asset from another blockchain.
Frequently Asked Questions About Secret Network Axelar exploit
1- What caused the Secret Network Axelar exploit?
A contract minted saTokens without checking incoming transfers. The attacker exchanged those unbacked tokens for real escrowed assets.
2- How much was stolen?
The reported loss was about $4.67 million.
3- Was Axelar’s core network compromised?
No. Axelar said its core protocol and IBC were not compromised.
4- Which assets were affected?
The tokens included saUSDT, saUSDC, saDAI, saWETH, saWBTC, saWBNB, and sawstETH.
