Recovery & Relaunch: What's Been Done, When, and What's Next

We want to bring everyone up to speed on the significant progress made toward recovery and relaunch since our last comprehensive update in the official Bonzo Finance Discord.

While a path to both a successful recovery and a relaunch continues to evolve in different ways, we’ll communicate updates in the official Discord server. Starting with this update, we'll share more frequently as we reach key recovery milestones and sub-milestones.

Recovery & Relaunch: Intermingled Dependencies

Recovery and relaunch are not two separate projects; they share many dependencies, and some of the work, such as the regulatory and business-side pieces, extends beyond the exploit itself. The team is advancing the technical, regulatory, and business work-streams for both in parallel, so that neither track has to wait on the other.

Our top priority is ensuring that users are taken care of as quickly as possible (for funds and compensation claims) with accuracy, fairness, and safety. The next priority, which shares dependencies with the recovery process, is attempting to ensure that the protocol can successfully relaunch for the long term. A successful relaunch requires structural changes that secure the support and resources needed for the protocol to operate as before, while also expanding and realigning its scope with broader Hedera and industry narratives and trajectories.

The team stands alongside the community in working towards a positive long-term outcome for users, the protocol, and the broader Hedera ecosystem/economy.

Through our ongoing engagements with stakeholders across (and peripheral to) the Hedera ecosystem, it has become clear that the Bonzo Finance protocol is viewed as critical DeFi infrastructure in the Hedera economy for retail and institutions. Every economy worth its weight requires credit markets (lending) to function, and Bonzo Finance has been the largest and only provider of this primitive for Hedera. This comes with both benefits and responsibilities: increased ecosystem support, as in this case, but with requirements designed to ensure the protocol's committed, sustainable long-term operation.

Below are granular details, including dates and timestamps, documenting recovery work performed since the incident.

We truly appreciate everyone’s patience, level-headedness, and trust during this time, especially amid uncertainty. We care deeply about every user in this community and what we’ve all built together. This is not a zero-sum game; Bonzo Finance does not win unless everyone wins.

We’ll continue trying our hardest to serve you, our community. In return, we ask for your trust in our team and in our commitment to do everything possible to ensure the best possible outcome.

Recovery Stages & Status

✅ Stage A: Cut interest rates to ~0% across all 14 lending pools, so debt balances stop growing while the protocol is paused; any interest accrued during the incident-derived interest rate spike(s) will be omitted from final calculations.

✅ Stage B: White-hat repayment / safely returning borrowed assets to the protocol under controlled conditions.

🔄 Stage C: Voluntary loan repayment and claims. Allowing for a repayment window for users, sweeping recoverable assets from the protocol into a redemption contract, adding supplemental recovery funds, and allowing eligible users to claim from a front-end portal. This is still in progress, but substantially prepared; smart contract development, accounting, audits, and testnet rehearsals are either completed or well underway.

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INCIDENT & IMMEDIATE RESPONSE

July 11, 00:51 UTC: An abnormal SAUCE oracle update was accepted on mainnet. The USDC and WHBAR borrowing transactions that followed were completed within the next 20 seconds.

July 11, 01:41 UTC: The LendingPool was paused at block 97506158, about 49 minutes after the first abnormal transaction. The protocol has remained paused since then. This includes supply, withdraw, borrow, repay, and all liquidation functionality. No liquidations will be allowed on any positions, including those currently below or that fall below a health factor of 1.

We reconstructed the incident from Hedera Mirror Node records, historical contract calls, transaction traces, and the deployed contract interfaces. We decoded the oracle payload itself and pinned down the exact boundary between Bonzo's oracle adapter and the external verification infrastructure.

ACCOUNTING ACTIVITIES

July 11 to August 10: We built a reproducible snapshot system covering positions and reserves at each recovery boundary; the final post-repayment dataset was committed on August 10 at 10:46 UTC.

July 16: We built a deterministic recovery-accounting pipeline: fixed historical inputs, integer-only math, completeness checks, and hash-bound manifests.

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STAGE A: INTEREST RATE CUTS TO ~0% (COMPLETED JULY 15)

We completed development of an atomic executor to refresh the stored rates across all 14 reserves without ever leaving the pool publicly unpaused. The original package completed internal review and an independent Halborn audit before the first execution attempt.

July 15, 12:46 UTC: First attempt at implementation; the simulation caught Hedera's child-record limit before the refresh transaction was submitted, and the safety design did its job: the original emergency admin was restored within a minute, and an independent readback confirmed the pool had stayed paused and no reserve had been touched.

July 15, 14:39 to 14:41 UTC: We executed the redesigned flow in four fixed batches. All four succeeded, all 14 reserve rates were refreshed, and the pool was re-paused after every batch.

July 15, 14:43 UTC: Final verification confirmed every reserve held the approved reduced rates, all reserves remained frozen, and the pool remained paused. Stage A complete.

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STAGE B: WHITE-HAT REPAYMENT (COMPLETED AUGUST 6)

July 17 to 20: We built the Atomic Repay contract, which allows approved white-listed accounts to repay their own debt while the pool remains paused, along with its deployment and operational tooling.

July 23: Halborn delivered its audit assessment on these contracts. There were ten findings, all low-severity or informational; none were critical, high, or medium severity. We committed fixes for all ten that same morning (08:58 to 09:50 UTC), and Halborn confirmed the changes were correct and the contract was finalized.

July 27: The final helper contract was deployed on mainnet at 13:13 UTC. The emergency-admin authority was transferred to it at 13:48 UTC with the pool still paused. The first mainnet token repayment test succeeded at 14:18 UTC, and the first native-HBAR path at 14:20 UTC, with the pool confirmed paused afterward.

July 27 to August 6: Eleven operational mainnet repayment tests were performed in total. Ten succeeded; the one failure reverted atomically without changing any debt or leaving the pool unpaused.

August 6: The white-hat account completed a final path test at 10:35 UTC, then the four settlement repayments between 14:56 and 15:05 UTC. The pool was confirmed paused after the last one. The repayments and reconciliation are complete.

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STAGE C: VOLUNTARY REPAYMENT WINDOW & USER CLAIMS (IN PROGRESS)

July 21: Full testnet rehearsal of the recovery aToken deployment, upgrade, and reserve-sweep workflow, run from 09:20 to 12:28 UTC.

July 21 to 24: We deployed and validated testnet versions of the Redemption (claims) contract, tested storage-compatible upgrades, and prepared a multi-claimant Merkle distribution package.

Starting July 24: We hardened the Redemption (claims) contracts and tooling, including typed claim paths for tokens, native HBAR and zero entitlements, funding checks, HTS association checks, WHBAR conversion controls, Merkle commitment verification, storage layout validation, guarded upgrades, pause controls, and post-expiry recovery procedures.

August 2 to 18: We finalized the separate Public Atomic Repay contract. Halborn's August assessment returned eight findings; we implemented source-level fixes for all eight and expanded the adversarial and upgrade-safety test suites. Halborn's final review of those fixes is still pending.

August 11, 13:35 to 13:40 UTC: We deployed and validated the fixed implementation for the Public Atomic Repay contract end-to-end on testnet: token associations, temporary authority transfer, activation through the controller process, and a complete debt repayment.

What’s Ahead

In order (sans explicit completion dates):

As with everything in an active recovery, this sequence reflects the current plan and may adjust as dependencies resolve.

• Receive Halborn's final review of the public repayment contract fixes.
• Receive the final audit report and fix any necessary changes for the Public Repayment contract and continue testing procedures for the Redemption (claims) contracts.
• Opening a repayment window (using the Public Repayment contract) for users to voluntarily repay active loans.
• After the repayment window closes and we complete final calculations, deploy Stage C contracts to mainnet, fund the redemption contract, and activate user claims.

We'll continue to post regularly and provide updates on milestones and sub-milestones as progress continues.

Disclaimer

This update is provided by Bonzo Finance Labs for informational purposes only. It describes work completed to date and the current plan for the ongoing recovery effort. It is not financial, investment, legal, accounting, or tax advice, and nothing in it constitutes an offer to sell or a solicitation to buy any token, security, or other financial instrument.

This update contains forward-looking statements, including statements about planned recovery steps, a potential repayment window, the redemption and claims process, and a potential relaunch of the protocol. These statements reflect current intentions and expectations only. They depend on factors not fully within our control, including third-party participation and funding, security audit outcomes, and legal and regulatory requirements, and they may change materially or may not occur. Nothing in this update creates a binding commitment, guarantee, or assurance of any particular recovery amount, compensation level, timeline, or outcome.

Participation in any repayment window or claims process will be governed exclusively by the final program terms, eligibility criteria, and documentation published when those programs open. If this update and that final documentation differ, the final documentation controls.

This update is published by Bonzo Finance Labs and does not constitute a statement, commitment, or obligation of the Bonzo Finance Foundation or of any third party referenced in this or prior communications. References to third parties do not imply their endorsement.

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