Initia iUSD Backing to Be Restored After $2.7M Hack

The funding will cover verified shortfalls up to 1.08 million USDC, 105 ETH, and 1.4 million AUSD0. According to the Foundation, the money comes from its own treasury, not from recovered attacker funds. The Initia L1 and its rollups remain halted for now.

What Happened in the Initia iUSD Exploit

At roughly 14:59 UTC on October 23, an attacker exploited a bug in Initia MoveVM’s script caching. The flaw let malicious code bypass security checks.

Because of that bug, the attacker spoofed the MoveVM state. As a result, they credited themselves with unbacked balances of WETH, iUSD, and USDC on the Initia L1.

Crucially, the total supply of each token never changed. No native INIT was minted either. In other words, the attacker printed fake claims rather than new coins.

Initia then halted the L1 and every connected rollup at 15:41:30 UTC the same day. The halt landed about 42 minutes after the first malicious mint. You can read the project’s full incident disclosure on X.

Co-founder Ezaan Mangalji, known as Zon, called it a Day 0 bug in Initia’s MoveVM on Cosmos SDK. He said it let the exploiter mint extra tokens on the L1, yet never touched native INIT.

How the Attacker Drained $2.7 Million

Before the halt, the attacker moved the fake balances off-chain fast. They bridged out 105 WETH and about 1.4 million AUSD0 through LayerZero. At the same time, they sent roughly 1.08 million USDC through Noble and Circle’s CCTP.

The attacker then swapped the proceeds into 1,135.52 ETH. Those funds now sit in a single Ethereum wallet, 0x358ef0130f7a5aa516dcd81bdc80b18cde41cac8. So far, none of it has moved back.

Independent analysis by Bitquery drew an important line. The real assets paid from bridge reserves came to about $2.73 million. Meanwhile, the face value of the unauthorized balances printed on Initia reached roughly $7.48 million.

The drain hit Noble hardest. According to Bitquery, the Noble USDC reserve for Initia fell from about $1.09 million to an intraday low of just $63.

On-chain sleuths traced the route through two Ethereum bridge adapters and a Noble reserve account. The printing itself first surfaced in Initia transactions timestamped at 14:59 UTC.

The Initia Foundation Funding Plan

At 07:29 UTC on October 28, the Initia Foundation posted that it had approved the restoration funding. The plan targets the Noble USDC, WETH, and AUSD0 held as Initia iUSD collateral.

The official @initia account confirmed the same plan hours later. It said the backing of affected assets will be fully restored when the chain resumes.

Still, the pledge carries conditions. The Foundation framed the caps as “verified shortfalls” that depend on reconciliation and final transfer approval. So the transfers had not yet happened at the time of the announcement.

No public blog post-mortem, governance proposal, or multisig transaction for the funding appeared in available sources. A security fix was drafted and under audit with partners as of October 27.

What iUSD Backing Actually Means

The Initia iUSD token is the chain’s native dollar stablecoin. Users mint it 1:1 by depositing or bridging Agora’s AUSD, and redemption releases the underlying asset.

Noble USDC, WETH, and AUSD0 sat in reserves and bridge lockboxes that supported these positions. “1:1 backing” simply means every outstanding unit should match an equal value of real collateral.

A verified shortfall is the measured gap between outstanding tokens and the collateral that remains. Reconciliation confirms that number before any payout.

Here the gap formed differently than a typical wallet theft. The attacker presented the unbacked balances to bridges, and the bridges released real reserve assets because they treated the claims as valid.

As a result, genuine collateral left the system while the fake balances stayed behind until the halt. This is a bridge-accounting problem, not inflation of any token’s supply.

Market Impact and Open Questions

INIT traded around $0.13 to $0.16 near the incident. After an initial dip of about 14%, the token recovered to near $0.18 by October 28, according to various aggregators.

Initia’s total value locked sat near $5.65 million on October 28, per DefiLlama. The iUSD circulating supply stood around 1.69 million, though the halt limits live trading data.

Agora pushed back on one point. It said no Agora-issued AUSD was minted on Initia, and that AUSD itself stays fully backed. The loss instead sits with third-party adapter depositors.

Several unknowns remain. The exact verified shortfall, the restart date, and the full post-mortem are still pending. None of this is financial advice, so treat halted-chain data with care.

What Comes Next for Initia

The next steps are clear even if the timing is not. Initia must finish reconciliation, approve the final transfers, and ship the audited fix before any restart.

For holders of Initia iUSD, the Foundation’s pledge is a meaningful signal ahead of the resume. Yet the backing only becomes whole once the transfers actually land. We will update this story as the chain reopens and the post-mortem drops.