Snowdog - REKT Analysis
What Happened
Snowdog, described as a "decentralized reserve meme coin" forked from Snowbank, launched an 8-day accumulation phase followed by a buyback event on November 26, 2021. The buyback was intended to allow SDOG token holders to cash out using $44M in MIM from treasury funds. However, the price mechanism used during the buyback created extreme disparities, with early traders profiting massively while later participants suffered significant losses.
Technical Root Cause
The project implemented a custom AMM (automated market maker) with a modified liquidity pool specifically for the buyback, separate from the existing TraderJoe exchange where SDOG had been trading at ~$1,350.
The custom pool introduced a "_mathematical challenge_" mechanism (the challengeKey) designed to prevent bot frontrunning. When liquidity migrated from TraderJoe to this new pool, the pooled ratios established a spot price of approximately $70,000 per SDOG token—a 50x increase from market rates.
Attack Vector/Exploit Steps
1. Prior Knowledge: Two addresses funded via FTX approved the custom pool contract before the front-end went live, indicating advance knowledge of the mechanism.
2. Early Execution:
3. Liquidity Migration: Pool initialization at 0xb853a431a06643ca0b557bf521d55e07334d50a3d03d925905927234810b553e
4. Rapid Price Collapse: Within 36 seconds of front-end reveal, SDOG market price fell below pre-buyback levels (~$1,200).
Financial Impact
• Total Extracted: ~403 SDOG for approximately $18M (vs. $500k at pre-buyback rates)
• Early Winners: First two transactions captured ~40% of available proceeds
• Subsequent Losses: Majority of users faced either below-market selling prices or token depreciation
• Collateral Damage: Snowbank token price declined due to association with the failed project
Remediation
The article presents the incident without explicit remediation recommendations. However, implied lessons include:
• Avoiding custom liquidity mechanisms that deviate from established market pricing
• Implementing transparent price discovery mechanisms
• Ensuring equitable access to buyback events rather than tiered participation windows
• Decentralizing contract access to prevent team-based exploitation
Additional Context: This was the first Avalanche-chain incident investigated by REKT. The suspicious timing, FTX-funded addresses, and technical access to contract mechanisms suggest possible insider coordination rather than random market dynamics.