Nearly $4.67 million worth of tokens were drained from Secret Network after an attacker exploited an ICS-20-based smart contract used to facilitate cross-chain transfers, according to Axelar’s June 19 statement.
The incident exposed another vulnerability in the bridge infrastructure connecting the Cosmos-based blockchain, but Axelar said the issue was isolated to the Secret-side ICS-20 smart contract used in the Cosmos IBC connection between Secret and Axelar. The Axelar core protocol, other IBC connections, other chains, and other escrow accounts were not affected, the company said.
The stolen assets were tokens that were linked from Axelar to the Secret Network, a privacy-focused blockchain built using the Cosmos SDK. According to blockchain security research firm Common Prefix, the attacker exploited a modified CW20-ICS20 token contract on Secret and stole approximately $4.67 million across seven assets, including USDT, USDC, DAI, WETH, WBTC, WBNB, and wstETH.
The secret contract flaw drains bridged assets from Axelar
Common Prefix said the vulnerability lies in a modified CW20-ICS20 contract deployed on the Secret Network to process incoming IBC transfers, according to reports summarized by Binance Square.
This contract was used to create wrapped forms of Axelar-bridged tokens after users deposited their tokens into Secret using the IBC protocol. However, the contract did not meet two important basic conditions: Whether token transfers were actually initiated through a native IBC channel controlled by Axelar and whether redemptions require more than what is available in escrow.
Ignoring these basic requirements, the contract agreed that all malicious IBC packets are valid if the token ID is on the allowed list.
Fake IBC packages generated unsupported wrapped codes
According to Common Prefix’s analysis, the attacker created the minimum Cosmos blockchain using a single validator, opened a new IBC channel to the Secret Network, and sent fake deposit packets through this path.
The vulnerable contract received the packets and generated wrapped tokens that are not supported on Secret. The attack continued by redeeming the tokens via the appropriate Axelar mechanism, and emptying the escrow accounts of the actual linked assets.
Common Prefix claimed that the contract did not verify the IBC channel the tokens were coming to. This made it possible to accept malicious packets sent over the controlled chain as the correct bridge operation.
It seems like the problem has been around for a long time. The shared prefix traced the missing verification process to early public commits in 2023, and said the March 2026 migration carried the same logic forward rather than removing the underlying vulnerability.
The structural failure was the authentication of the message. The system assumed that the upstream components would handle authentication, but this assumption was not valid under the attacker’s routing setup. As a result, spoofed messages can get through when the channel and token conditions match.
Emergency response is working to isolate the affected road
Axelar stated that its emergency task force disconnected the relevant IBC connection to the underground network immediately upon learning of the incident.
The group confirmed that there was no breach of Axelar’s basic protocol and that the problem remained confined to the underground network only. Axelar also said it has been in contact with exchanges and law enforcement.
For users who have linked assets from Axelar to Secret via the affected path, the immediate issue is recovery. With the escrow account depleted, assets pooled on Secret can no longer be exchanged for core tokens through that channel.
Recovery may also be more complex than a typical public chain bridge exploit because the secret network encrypts balances and transfers by default. This means that the attacker’s wallet and exploit transactions are difficult to scan through standard public block explorers.
Bridge security faces another validation test
The $4.67 million loss is less than some of the largest bridge hacks, but the incident is still significant because it hits a familiar vulnerability: cross-chain message validation.
like Cryptopolitan mentioned earlierthe Syscoin Bridge was temporarily shut down this month after an attacker exploited a validation vulnerability to mint nearly 5 billion unauthorized SYS tokens. This incident has been added to a growing list of bridge exploits in 2026.
In February, CrossCurve lost an estimated $3 million after attackers exploited vulnerabilities in the protocol’s smart contracts, according to Halborn’s autopsy.
The secret state is proof that a single unaddressed assumption in the on-chain infrastructure is enough to cause an entire collateral drain incident. It is possible that the underlying protocol remains non-negotiable while contracts at the edge of the bridge still offer users’ funds.
Axelar and Secret Network have stated that a full autopsy is now being compiled. Even then, the compromised channel is a warning that the security of the bridge is not just about the underlying protocol, but also about every smart contract that handles inter-chain communications.
