TL;DR:
- Estimated total loss: An attacker drained approximately $1.73 million, distributed across 1,658,524 USDC and 69,257 DAI from the legacy Version 1 escrow contract.
- Technical mechanism: The incident stemmed from an overflow and truncation error (unsafe uint128 downcast) in the free-collateral calculation function.
- Route of funds: The stolen assets were converted into 689.2 ether (ETH) and transferred in batches to the privacy protocol Tornado Cash.
During Friday’s session, approximately $1.73 million was drained from the lending protocol Notional Finance. Unauthorized transactions were detected in its legacy escrow contract, immediately triggering alarms.
The initial alert emerged in the early hours of Friday after Specter’s monitoring systems detected the event. Security firms including PeckShield and CertiK later confirmed the incident.
#CertiKInsight 🚨
We have seen an ~$1.7M exploit on @NotionalFinance.
https://t.co/luKD7RcbVAThe attacker used two mintfCashPair() calls to create a -2^128 liability, which was truncated to 0 by an unsafe uint128() downcast in free-collateral valuation.
Stay Vigilant! pic.twitter.com/5T7E0XQfWJ
— CertiK Alert (@CertiKAlert) September 4, 2026
Blockchain records indicate that the preparatory transaction occurred at 23:58 UTC on September 3, 2026, within Ethereum block 25,900,220. The fund extraction was completed three minutes later, at 00:01 UTC on September 4, in block 25,900,234. The attacker moved an exact amount of 1,658,524 USDC and 69,257 DAI tokens from the escrow infrastructure.
The Arithmetic Flaw Behind the V1 Contract Overflow
A technical report by CertiK revealed that the attacker executed two calls to the mintfCashPair() function, generating an accounting liability of -2^128 in the system’s future cash (fCash) obligations.
That figure was processed through an unsafe numeric type conversion (unsafe uint128 downcast) during the free-collateral valuation. Operating outside safe arithmetic ranges, the resulting value truncated to exactly zero in the smart contract’s state reading.
QuillAudits analysts pointed out that the system automatically interpreted the account as holding zero active debt. According to the firm’s report, an explicit overflow check would have reverted the transaction instead of discarding the excess digits.
The vulnerability directly compromised the Version 1 (V1) escrow deposit contract. Technical sources emphasized that this legacy component remained active on mainnet with a residual balance, despite subsequent upgrades deployed across the protocol.
Asset Laundering and Market Impact
Once the funds were extracted, the attacker executed decentralized swaps to convert the entire balance into 689.2 ETH. Next, the assets were routed to the Tornado Cash mixer in multiple fractional batches of 100, 10, and 1 ETH, concluding past 00:30 UTC.
The remaining balance in the affected escrow contract stood at roughly $60,600 at the time of reporting. The protocol’s native token, NOTE, traded near $0.0065 during the session, representing a market capitalization of approximately $400,700 with intraday fluctuations of 3.5%.
As of publication, the Notional Finance development team has not issued an official statement clarifying whether the drained assets belonged to the project’s treasury or user deposits. Independent Web3 security researchers continue to monitor the addresses involved on-chain while awaiting an official post-mortem report from the developers.
