What happened

Freysa, an autonomous AI agent controlling a prize pool funded by user message fees, was tricked into transferring nearly USD 47,000 in cryptocurrency to user p0pular.eth. 

The system was designed so that users paid increasing fees to attempt to convince Freysa to send the funds, with most failed attempts simply adding to the prize pool. 

After 481 unsuccessful tries by various participants, p0pular.eth exploited Freysa's internal logic - specifically the distinction between functions meant for incoming and outgoing transfers, reframing an outgoing transfer as an allowed incoming one - which caused Freysa to approve the transfer and release the entire prize pool to their wallet.

The manipulation not only drained the pool but meant dozens of prior participants lost out on their invested fees.

Why it happened

The incident was enabled by Freysa's transparency and the openness of its logic, but also by an ambiguous coding directive making it possible for a well-crafted prompt to bypass protections. 

The smart contract and game rules were open-source, yet insufficiently hardened against sophisticated manipulation - especially prompt injection attacks - which allowed someone to frame function calls to trick the agent.

Some observers suggested that the winner may have had insider knowledge, indicating possible accountability and governance gaps in the bot’s deployment and oversight, while the financial incentives encouraged risky behaviour among participants.