Cryptocurrency hack has been the topic of last week. Indeed, malevolent actors targeted three cryptocurrency platforms, only a few days apart.
Cryptocurrency exchange Bitmart and decentralized finance (DeFi) protocols Monox Finance and BadgerDAO all suffered hacks. The attacks led to hundreds of million dollars losses.
Let’s see exactly what happened and how Scorechain’s solution can help trace cryptocurrency hack funds and mitigate the risks.
MonoX Finance exploited
First, we have the MonoX Finance hack. Monox Finance is a new decentralized finance (DeFi) protocol. It uses a “single token design” for its liquidity pools (instead of the traditional two-token pools).
Last week, the team announced on its Twitter account the exploit of the protocols’ smart contract. The team also released a post mortem on Dec. 1.In short, the exploit consisted of two successive attacks on Polygon and Ethereum for a total amount lost surpassing $30 million.
More specifically, the hacker used price manipulation of the project’s token MONO to pull off the attack. The hacker exploited a bug from the swap contract which caused the token price to increase significantly. Then, these inflated tokens were used to buy all other assets in the pool. We immediately red-flagged the addresses related to Monox exploit in our database. Scorechain’s team flagged the addresses as “hack” with a low risk-AML score of 1.
If we analyze the flagged addresses, we can see that the hacker sent 100 ETH to Tornado.cash, a mixing service. However, the wallet still holds:
4,125+ units of Magic Internet Money (MIM);
21+ units of Wrapped BTC (WBTC);
2,149+ units of Wrapped Ether (WETH)
BadgerDAO cryptocurrency hack
Then, Badger DAO protocol lost around $120 million on Dec 2. Defiyield.app ranks this hack as the fourth-largest one on its website. BadgerDAO is a Bitcoin DeFi protocol offering yield earnings for wrapped BTC-like tokens on the Ethereum blockchain.
The hacker attacked the front-end of the decentralized application to send users’ tokens to their own addresses. As soon as the attack came to the attention of Badger, the team paused the contracts, limiting the number of stolen funds. Of course, we flagged the related addresses accordingly on Scorechain’s Ethereum and Bitcoin platforms.
In this hack, the attacker used DEX swaps to change one token to another. More specifically, the attacker swapped ERC-20 tokens to wrapped BTC (wBTC) as shown below. Also, it is interesting to note that 1,284.35321 BTC held on the flagged Bitcoin addresses are still sitting there for now.
Bitmart’s hot wallets compromised
Last, Bitmart, a cryptocurrency centralized exchange (CEX) has suffered an attack over the weekend resulting in almost $200 million in losses.
The attackers compromised Bitmart’s hot wallets on Ethereum and Binance Smart chain blockchains as announced by the exchange’s CEO on Twitter. The related addresses have been flagged as high risk on the Ethereum platform.
If we have a look at those 2 addresses we can see that the hacker swapped the stolen tokens to ETH and then send the ETH (more than 21,000 ETH) to Tornado.cash, a mixing service. Therefore, it would be harder to trace the funds.
Mitigating cryptocurrency hack risks with Scorechain
These hacks add up to a long series of hacks that targeted the DeFi and crypto ecosystem this year. For example, according to DeFi Yield Rekt database, the amount lost to hacks or exploit amounts to $1,865,793,338 for 2021. Moreover, major platforms suffered attacks this year such as Poly Network or Cream Finance.
Cryptocurrency hack-related funds represent higher risks as they are most likely to be used for money laundering (ML) or terrorism financing (TF) purposes.
Scorechain Blockchain Analytics solution helps compliance teams worldwide to implement a risk-based approach to transaction monitoring with risk scoring and risk indicators and clear visualization of transaction flows. The solution provides tools to easily assess and manage AML risks related to cryptocurrency addresses, transactions and entities and to detect suspicious activity (such as hacks, scams, terrorism, etc.).
Today, more and more regulations are put in place to prevent cryptocurrencies from being used for money laundering (ML) or terrorism financing (TF) purposes. Would you like to discover how our solution can help you with fast-evolving regulations for cryptocurrencies? Don’t hesitate to ask for a free demo.
Scorechain is a Risk-AML software provider for cryptocurrencies and digital assets. As a leader in crypto compliance, the Luxembourgish company has helped more than 200 customers in 40 countries since 2015, ranging from cryptocurrency businesses to financial institutions with crypto trading, custody branch, digital assets, customers onboarding, audit and law firms, and some LEAs.
Scorechain solution supports Bitcoin analytics with Lightning Network detection, Ethereum analytics with all ERC20 tokens and stablecoins, Litecoin, Bitcoin Cash, Dash, XRP Ledger, Tezos, and Tron with TRC10 and TRC20 tokens. The software can de-anonymize the Blockchain data and connect with sanction lists to provide risk scoring on digital assets, transactions, addresses, and entities. The risk assessment methodology applied by Scorechain has been verified and can be fully customizable to fit all jurisdictions. 300+ risk-AML scenarios are provided to its customers with a wide range of risk indicators so businesses under the scope of the crypto regulation can report suspicious activity to authorities with enhanced due diligence.