Recovery of Frozen Exploiter Funds

Dear Sherpas,

On August 20th, 2026, MANTRA Chain was affected by a security incident in which approximately 721M $MANTRA were withdrawn without authorization through an exploit in an upstream cosmos/evm dependency. Following the incident, the chain was halted and, with the v8.4.0 upgrade, the exploiter's address was sanctioned at the protocol level, preventing any further movement of the funds it holds. In parallel, we have been working with Hong Kong law enforcement and the exchange operator that received the majority of the withdrawn tokens to recover as much as possible.

With this proposal, we would like to take the next step in addressing the impact of the incident and ask for your support and approval.

Proposal Summary:

The steps we propose are the following:

1. Retrieve the $MANTRA frozen in the exploiter's address as part of the next MANTRA Chain software upgrade, and add them to the OM Upgrade incentives allocation.
2. Add any further $MANTRA recovered from the incident to the OM Upgrade incentives allocation until the existing shortfall is fully restored.
3. Burn any recovered $MANTRA exceeding the OM Upgrade allocation shortfall (120M $MANTRA).
4. Task the team with proposing further measures to reduce the impact of the incident, once the final unrecovered amount is known, and no later than the end of H1 2027.

Reasons for Proposal:

1. Retrieve the frozen $MANTRA from the exploiter's address

The following address has been sanctioned since the v8.4.0 upgrade. Sanctioning an address means that said address cannot move funds:

We propose that the full balance of this address be retrieved and transferred to the OM Upgrade allocation. Approval of this proposal mandates the team to include this transfer in the next scheduled MANTRA Chain software upgrade by way of an upgrade handler. The code will be published for review in advance, together with the rest of the upgrade.

Receiving OM Upgrade Incentives Wallet: mantra14g459vwkat3r7xjerz4fkvcpyxdkuyezm0s2p8

2. Add further recoveries to the OM Upgrade allocation

The majority of the withdrawn tokens were deposited to a centralized exchange. Recovery of these funds is being pursued jointly with Hong Kong law enforcement and the exchange operator, and the amount that can be recovered is not yet known. We commit that any further $MANTRA recovered from the incident will be added to the OM Upgrade allocation until the shortfall of 120,923,932.44 $MANTRA taken from it is fully restored. After the retrieval set out in point 1, the remaining shortfall will be 82,966,444.21 $MANTRA.

3. Burn any excess

Should recoveries exceed the amount required to restore the OM Upgrade allocation, the excess will be permanently burned, reducing the total supply of $MANTRA.

4. Further measures to reduce the impact of the incident

Once the recoverable amount has been confirmed, the remaining shortfall will become known. We propose that the team be tasked with presenting further measures to reduce the impact of the incident to the community through a separate governance proposal, no later than the end of H1 2027 (June 30th, 2027).

Conclusion:

Thank you Sherpas for your continued support during this period. Protecting the integrity of MANTRA Chain and its holders remains our highest priority. This proposal acts on the funds that are within our control today, and sets clear rules for how any further recoveries will be treated. As the outcome of the recovery process becomes known, we will return to the community with proposals for the remaining impact of the incident, and we will keep you informed as it progresses.

Approval of this proposal constitutes an endorsement of points (1) to (4) of the Proposal Summary section above and authorizes the team to develop and implement an appropriate solution.