The decentralized finance (DeFi) loan protocol Warp Finance, which lost $ 7.7 million last week in a flash loan attack, has recovered 75% of the funds, or about $ 5.85 million.

Sunday Update Announcement, Warp mentionned it collected the funds in the form of ETH / DAI LP tokens i.e. Uniswap liquidity provider tokens made up of Ether and DAI deposits. The funds, however, were lost in the DAI and USDC Stables.

“The reason we chose to make LP Tokens instead of Stable Coins is that these are the tokens that we were able to collect,” Warp said. He did not explain how, precisely, the funds were recovered. Last week Warp said approximately $ 5.5 million are “always safe in the collateral safe”. The Block has contacted Warp to learn more about the recovery and will update this story if we have any news.

According to The Block’s research analyst Igor Igamberdiev, Warp could recover the funds because he transferred the administration rights of his smart contract to one of his external addresses. This allowed Warp to use the “LiquidateAccount” function and liquidate the attacker’s position. Warp was unable to use this feature right after the attack due to a two-day delay on administrative updates, Igamberdiev said.

So if Warp can control and liquidate user funds, how does that make it “decentralized”? The situation is indeed “quite dangerous,” said Igamberdiev, adding that Warp had still not started the process of restoring administrator rights to his smart contract.

This means that if any of the developers of Warp act in a malicious way, they could liquidate the funds of the users who have open positions in Warp. Currently, the protocol is suspended and is about to relaunch.

As for reimbursement of the recovered funds, Warp said it will distribute the amount to affected users within 24 hours, pro-rated to the amount of wUSDC and wDAI held at the time of the attack.

Warp said it will also release “Portal IOU [‘i owe you’] tokens “to affected users to make them whole, details of which will be shared” in the coming days.

Update: This story has been updated with additional information and commentary from The Block’s research analyst Igor Igamberdiev.

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