Warp Finance LP Collateral Manipulation

On December 17, 2020, Warp Finance lost approximately $7.8 million because it valued Uniswap LP-token collateral from the pool's manipulable spot reserves. A flash loan inflated the LP valuation; the attacker over-borrowed against it. Roughly $5.5M was recovered (returned/frozen with white-hat and community help).

What happened

Warp accepted Uniswap LP tokens as collateral, pricing them from the pair's current reserves. A flash loan skewed the reserves, inflating the LP-token value Warp computed; the attacker deposited LP collateral and borrowed far more stablecoins than its true worth. Much was recovered post-incident.

Why it matters

Warp Finance is the LP-token-collateral pricing variant of the 2020 flash-loan oracle wave — specifically the lesson that LP-token valuation must use reserve math that is resistant to single-transaction manipulation (fair-LP-pricing / sqrt(k) formulas), never raw spot reserves. It predates and prefigures Lodestar and every later LP-collateral incident. December 2020 already contained the full lesson; the catalogue's later LP-collateral entries are the ecosystem failing to read it.