Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime

Cryptohack Roundup: Hack Attacks Plummet in 2023

Also: Changpeng Zhao to Remain in the US; Vulnerability in Bitcoin Core
Cryptohack Roundup: Hack Attacks Plummet in 2023
Image: Shutterstock

Every week, ISMG rounds up cybersecurity incidents in digital assets. This week, TRM Labs said hacking incidents fell sharply in 2023, former Binance chief Changpeng Zhao was ordered to remain in the U.S., the DOJ indicted two people in a $25 million crypto AI scam, OKX suffered a $2.7 million hack, the National Vulnerability Database added a security flaw in Bitcoin, a Uranium Finance hacker may be laundering stolen funds the old-school way, two crypto provisions were removed from the 2024 NDAA, and Poloniex is on the U.K. regulator's radar.

See Also: OnDemand | NSM-8 Deadline July 2022:Keys for Quantum-Resistant Algorithms Implementation

Crypto Hacking Declines

Hacking incidents decreased by more than half this year when compared to the previous year. A total of 160 attacks were recorded in 2023, and $1.7 billion was stolen as of November, according to TRM Labs. The stolen amount reached nearly $4 billion in 2022.

TRM Labs attributed the decline to improved security measures, increased law enforcement and better industry coordination. Infrastructure attacks, particularly involving private key theft or seed phrase compromise, accounted for nearly 60% of the total stolen amount, averaging $30 million per incident, larger than protocol attacks and code exploits combined, it said.

The top 10 hacks - including those targeting Euler Finance, Multichain, Mixin Network and Poloniex, represented nearly 70% of all stolen funds, and several exceeded $100 million.

Changpeng Zhao to Remain in US

A Seattle district court judge ordered Binance founder Changpeng "CZ" Zhao to remain in the United States until his sentencing on Feb. 23, over potential flight risk concerns. The former CEO of the crypto exchange sought to return to his family in the United Arab Emirates, but the government says it's likely the UAE government has offered him citizenship. Zhao pleaded guilty to money laundering charges in November and faces a potential 18-month prison term. His company made a $4.3 billion settlement with U.S. agencies, and Zhao, accused of one count of Bank Secrecy Act violations, stepped down as CEO and agreed to pay an additional $50 million.

A $25M AI Crypto Trading Scam

The U.S. Department of Justice indicted David Gilbert Saffron, an Australian national, and Vincent Anthony Mazzotta Jr., a Los Angeles resident, for allegedly orchestrating a $25-million Ponzi scheme through an artificial intelligence crypto-trading scam.

The duo allegedly operated trading programs promising to use an AI-automated trading bot for high-yield profits in cryptocurrency markets. But instead of trading, they allegedly misappropriated user funds for personal luxuries, including private jet flights, luxury hotels, mansions, a personal chef and a private security.

The defendants are also accused of concealing victims' cryptocurrency investments through cross-chain swaps and using mixers to evade detection, operating under names such as Circle Society, Bitcoin Wealth Management, Omicron Trust, Mind Capital, Federal Crypto Reserve, and Cloud9Capital.

The indictment includes charges of conspiracy to commit wire fraud, wire fraud, conspiracy to obstruct justice, conspiracy to commit money laundering, and money laundering.

$2.7M OKX Hack

Decentralized exchange OKX fell victim to a hack after a private key belonging to the proxy admin owner was leaked, according to blockchain security firm SlowMist. On-chain analysis firm Scopescan confirmed the attack, quoting the DEX as saying that hackers had targeted an old, abandoned contract and that it had fixed the issue. OKX told Scopescan that it would cover any losses resulting from the hack, which PeckShield estimated to be approximately $2.7 million.

Bitcoin's Security Flaw

Bitcoin Core developer Luke Dashjr flagged a security issue with the cryptocurrency's digital infrastructure that is now listed by the U.S. government in the National Vulnerability Database as CVE-2023-50428. Certain versions of Bitcoin Core and Bitcoin Knots contain a security flaw that could allow hackers to bypass data carrier limits by masking data as code. Managed by the National Institute of Standards and Technology, NVD helps with tracking and addressing potential security threats. Exploiting the vulnerability may result in large amounts of nontransactional data spamming the blockchain, potentially affecting network size, performance and fees. Dashjr said that developers had fixed the bug in Knots but that Core was still vulnerable.

Laundering Crypto the Old-School Way

A hacker suspected of exploiting the Uranium Finance DeFi platform in 2021 may have laundered the stolen funds the old-school way, using Magic: The Gathering trading cards, said blockchain investigator ZachXBT. The hacker withdrew 11,200 ETH over a year from Tornado Cash in increments, converting it to wrapped ETH and then to USDC and eventually purchasing MTG trading cards. The hacker deposited some funds into centralized exchanges such as Kraken, BitPay and Coinbase. The complex series of transactions was likely designed to obfuscate the origin of the funds. ZachXBT highlighted the correlation between the Uranium hacker's deposit to Tornado Cash in March 2023 and the subsequent withdrawal by the MTG cards buyer, suggesting they may be the same individual involved in the $50 million hack.

Crypto Provisions Removed From NDAA

Congress removed two provisions addressing anti-money laundering concerns in cryptocurrency from this year's fiscal year 2024 National Defense Authorization Act. The now-deleted provisions focused on setting up a review system for crypto activities and using crypto mixers and tumblers to combat anonymous transactions. The first provision required coordination between the treasury secretary and banking and government regulators to establish a risk-focused examination system for financial institutions dealing with crypto. The second provision mandated the production of a report detailing crypto transactions linked to sanctioned entities and regulatory approaches in other jurisdictions.

Poloniex on UK FCA Radar

The U.K. Financial Conduct Authority added crypto exchange Poloniex to a list of unauthorized entities, meaning that the company cannot promote financial services in the country. The Seychelles-based firm is one of the three companies connected to entrepreneur Justin Sun that have suffered multiple hacks in the past two months.


About the Author

Rashmi Ramesh

Rashmi Ramesh

Assistant Editor, Global News Desk, ISMG

Ramesh has seven years of experience writing and editing stories on finance, enterprise and consumer technology, and diversity and inclusion. She has previously worked at formerly News Corp-owned TechCircle, business daily The Economic Times and The New Indian Express.




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