- A protocol exploit in the Flow blockchain’s Cadence runtime on December 27 allowed an attacker to create $3.9 million in counterfeit tokens.
- Network validators halted the chain within six hours and froze most fraudulent assets on exchanges before they could be liquidated.
- Flow has patched the vulnerability and destroyed the counterfeit tokens via a governance-approved recovery plan, with 99% of accounts remaining unaffected.
The Flow blockchain contained a Dec. 27 protocol exploit that let an attacker create counterfeit tokens by abusing a flaw in the network’s Cadence runtime, leading to about US$3.9 million (AU$5.9 million) in confirmed losses before the incident was stopped, the Flow Foundation said Tuesday in a technical post-mortem.
The Foundation said the attacker did not break into wallets or drain existing balances. Instead, the bug allowed some assets to be duplicated in a way that bypassed normal supply controls, effectively creating extra tokens that should not have existed.
The risk was that counterfeit tokens could be sold into real markets before being detected.
Read more: Surviving 2026: Aussie Analysts on How to Filter Financial Noise and Master the Final Cycle
How the Flow Incident Went Down
Crypto News Australia reported last week that Flow started rebuilding its network after the team realized an exploit on Saturday. It started with suspicious exchange activity tied to a large FLOW token deposit and rapid withdrawals.
Flow said validators coordinated a halt within six hours of the first malicious transaction and switched the network into a read-only mode to block “exit paths” while the team investigated. The Foundation said exchange partners also froze most of the counterfeit assets before they could be liquidated.
Two days later, Flow restarted under an “isolated recovery” plan designed to keep valid transaction history intact while enabling a governance-approved process to recover and permanently destroy the counterfeit tokens.
Most accounts were not affected operationally. Flow said more than 99% of accounts retained full access during and after recovery, while a small number of accounts that interacted with the counterfeit tokens were temporarily restricted as a precaution.
The Foundation said it has patched the vulnerability, added stricter runtime checks, and expanded regression testing. It also said it is working with forensic partners and law enforcement, and plans to strengthen monitoring and bug-bounty programs as part of broader security hardening.
The flow token is down 53% since its launch in early December, currently trading at US$0.1012 (AU$0.15), as per CoinGecko data.
Related: Analysts Say Bitcoin Finds Its Footing as 2026 Opens, Eyes Turn to ETF Flow
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