Sui DeFi Protocol Full Sail to Wind Down Following Switchboard Oracle Incident
Full Sail, a decentralized finance (DeFi) protocol operating on the Sui blockchain, announced plans to shut down following a security breach involving oracle provider Switchboard that caused financial losses for users. The protocol immediately halted new deposits and claims for liquidity provider rewards to prioritize user compensation. This decision came after last week's incident where Switchboard's oracle infrastructure was allegedly compromised, impacting Full Sail's automated vaults.
Incident Timeline and Full Sail's Response
On Tuesday, Full Sail announced via X (formerly Twitter) its decision to wind down the protocol. The protocol immediately disabled new deposits and liquidity provider (LP) reward claims. Regular pools are set to enter withdrawal-only mode following final security assessments.
The move follows the detection of a security incident last week affecting Full Sail’s automated vaults after a suspected oracle breach involving Switchboard. Full Sail initially disclosed the event on Saturday, confirming fund losses and pausing deposit and withdrawal activities during the ongoing investigation.
Switchboard Infrastructure Compromise
Switchboard stated in an X post it was investigating a potential compromise of its Move-based oracle implementations. Its network was suspended across multiple blockchains including Aptos, Sui, IOTA, and Movement as a precaution.
An attacker managed to withdraw approximately $91,000 from three Full Sail vaults using the compromised oracle.
Separately, Virtue, a stablecoin lending protocol built on IOTA, reported losses around $455,000 and noted impairment to the collateral backing its VUSD stablecoin.
Compensation Plan and Next Steps
Full Sail committed to using its remaining protocol-owned liquidity to compensate affected users.
The team pledged to cover any shortfall to ensure community depositors are reimbursed first.
Withdrawal and claim instructions are expected to be published within the coming days to facilitate this process.
Why it matters
The announcement of Full Sail winding down is significant for the decentralized finance community on the Sui platform and beyond, highlighting the critical importance of oracle security in DeFi protocols. The Switchboard incident demonstrated how vulnerabilities in oracle infrastructure, which feeds reliable data into smart contracts, can lead to substantial financial losses and force projects to cease operations. Full Sail's commitment to compensating users and covering any shortfall from its own resources underscores a responsibility toward its community. This event serves as a crucial lesson for the industry to strengthen security measures and improve protective systems in DeFi, especially on emerging blockchains.
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