Hackers have returned nearly half of the $600 million they stole in what’s likely to be one of the biggest cryptocurrency thefts ever.
The cybercriminals exploited a vulnerability in Poly Network, a platform that looks to connect different blockchains so that they can work together.
Poly Network disclosed the attack Tuesday and asked to establish communication with the hackers, urging them to “return the hacked assets.”
A blockchain is a ledger of activities upon which various cryptocurrencies are based. Each digital coin has its own blockchain and they’re different from each other. Poly Network claims to be able to make these various blockchains work with each other.
Poly Network is a decentralized finance platform. DeFi is a broad term encompassing financial applications based on blockchain technology that looks to cut out intermediaries — such as brokerages and exchanges. Hence, it’s dubbed decentralized.
Proponents say this can make financial applications such as lending or borrowing more efficient and cheaper.
“The amount of money you hacked is the biggest in defi history,” Poly Network said in a tweet.
Hackers start to return the funds
In a strange turn of events Wednesday, the hackers began returning some of the funds they stole.
They sent a message to Poly Network embedded in a cryptocurrency transaction saying they were “ready to return” the funds. The DeFi platform responded requesting the money be sent to three crypto addresses.
As of 7 a.m. London time, more than $4.8 million had been returned to the Poly Network addresses. By 11 a.m. ET, about $258 million had been sent back.
“I think this demonstrates that even if you can steal cryptoassets, laundering them and cashing out is extremely difficult, due to the transparency of the blockchain and the use of blockchain analytics,” Tom Robinson, chief scientist of blockchain analytics firm Elliptic, said via email.
“In this case the hacker concluded that the safest option was just to return the stolen assets.”
Once the hackers stole the money, they began to send it to various other cryptocurrency addresses. Researchers at security company SlowMist said a total of more than $610 million worth of cryptocurrency was transferred to three addresses.
SlowMist said in a tweet that its researchers had “grasped the attacker’s mailbox, IP, and device fingerprints” and are “tracking possible identity clues related to the Poly Network attacker.”
The researchers concluded that the theft was “likely to be a long-planned, organized and prepared attack.”
Poly Network urged cryptocurrency exchanges to “blacklist tokens” coming from the addresses that were linked to the hackers.
About $33 million of Tether that was part of the theft has been frozen, according to the stablecoin’s issuer.
Changpeng Zhao, CEO of major cryptocurrency exchange Binance, said he was aware of the attack.
He said Binance is “coordinating with all our security partners to proactively help,” but that “there are no guarantees.”
“We will take legal actions and we urge the hackers to return the assets,” Poly Network said on Twitter.
DeFi hacks on the rise
DeFi has become a key target for attacks.
Since the start of the year until July, DeFi-related hacks totaled $361 million — an increase of nearly three times from all of 2020, according to cryptocurrency compliance company CipherTrace.
DeFi-related fraud is also on the rise. In the first seven months of the year, it accounted for 54% of total crypto fraud volume versus 3% for all of last year.
U.S Investigates Binance for Possible Insider Trading
U.S. investigations into Binance Holdings Ltd. have expanded, with authorities now examining possible insider trading and market manipulation — the latest sign that scrutiny of the world’s largest cryptocurrency exchange is intensifying.
As part of the inquiry, U.S. officials have been looking into whether Binance or its staff profited by taking advantage of its customers, said people with knowledge of the matter who asked not to be identified because the probe is confidential. The review involves Commodity Futures Trading Commission investigators, who in recent weeks have been reaching out to potential witnesses, one of the people said.
Though it’s not based in any one country, Binance runs a massive trading operation where everyday clients buy and sell digital tokens worth tens of billions of dollars outside the oversight of government watchdogs. That gives the exchange a view into millions of transactions, and U.S. authorities are questioning whether the firm exploited that access, including by trading on customer orders before executing them.
In a statement, a Binance spokesperson said the firm has a “zero-tolerance” policy for insider trading and a “strict ethical code” to prevent any misconduct that could hurt its customers or the crypto industry. Binance’s security team has long-standing guidelines for investigating wrongdoing and holding workers accountable, with termination being the minimal repercussion, the spokesperson added.
A CFTC spokeswoman declined to comment.
Compliance has been a constant headache for Binance and its outspoken founder, Changpeng Zhao, who goes by CZ. A growing list of nations have demanded that the company and affiliates cease offering services within their borders, claiming they lack proper licenses. In the U.S., the Justice Department and Internal Revenue Service have launched criminal probes into whether Binance has been a conduit for money laundering and tax evasion, Bloomberg has reported.
Binance hasn’t been accused of wrongdoing and the investigations may not lead to any official action. The CFTC and the Justice Department have been examining the firm for months and it could be some time before the agencies decide whether to pursue enforcement actions.
Binance is far from alone in getting unwanted attention from U.S. authorities. Washington has watched the rapid growth of crypto with alarm, with agencies ranging from the Treasury Department to the Federal Reserve and the Securities and Exchange Commission increasingly worried that the market is a hotbed of illicit activity and that firms are veering into traditional financial services without protecting consumers.
The CFTC was already probing whether Binance let U.S. residents buy and sell derivatives linked to Bitcoin and other virtual tokens, and the regulator is continuing to seek information as part of that line of inquiry.
The CFTC, which routinely shares its findings with other federal agencies, has sought internal Binance data and communications that could indicate the firm may have tried to sign up U.S. customers, one of the people said. Binance isn’t registered with U.S. authorities, meaning it’s supposed to bar Americans from trading derivatives, which the CFTC regulates.
Zhao, who regularly touts crypto on Twitter and in media interviews, said in a July blog post that there has been a “hyper-focus on regulation when it comes to Binance.” He highlighted Binance’s policies to prevent insider trading and, as another protection against misconduct, said the firm walls off the unit that handles the issuance of new tokens from the rest of the exchange’s staff. Binance’s global compliance team and its advisory board have grown 500% since last year, he added, with plans to double their size by the end of 2021.
Zhao, who has been working out of Singapore, has previously said that Binance has sophisticated surveillance systems to keep U.S.-based traders off its exchange. He has repeatedly said that the firm is committed to following rules in the countries in which it operates.
Among topics the CFTC has recently asked potential witnesses about is the location of Binance’s data servers, one of the people said. While it couldn’t be determined why the CFTC was interested, it could be tied to jurisdictional issues and whether the agency can assert authority over Binance. U.S. courts have previously tossed out litigation against the firm on the grounds that it has neither offices nor managers in the states.
In 2019, Zhou helped incorporate Binance.US, a separate company that caters to American clients. Brian Brooks abruptly resigned as Binance.US’s chief executive officer in early August after leading the company for just three months. Brooks, who was acting comptroller of the currency during the Trump administration, cited differences over the firm’s strategic direction.
The CFTC investigation into Binance is being run out of Chicago and includes some of the same officials who worked on the regulator’s case against BitMEX, a rival crypto exchange.
Last month, BitMEX agreed to pay $100 million in a settlement with the CFTC and the Financial Crimes Enforcement Network to resolve claims that it let U.S. residents trade derivatives and that it lacked proper anti-money-laundering controls. BitMEX didn’t admit or deny the allegations.
Total Market Value of Top Three Stablecoins More than Tripled YTD and Hit $110B
In the wake of growing interest in the crypto market, stablecoins or cryptocurrencies linked to an asset have seen their market capitalization surge this year.
According to data presented by MejoresApuestas, the combined market cap of Tether, USD Coin, and Binance USD, as the world’s top three stablecoins, more than tripled since the beginning of 2021 and hit over $110bn this week.
Tether`s Market Cap Jumped Over $68B, a 158% Increase YTD
Unlike other cryptocurrencies, stablecoins are relatively less volatile, and their value is determined differently. For example, the price of Bitcoin mainly follows demand and supply, or how many coins are being mined and how many investors want to buy the crypto. On the other hand, stablecoins are connected to the price of an altogether different asset.
Tether’s USDT, for instance, is connected to the price development of the US dollar. If the US dollar falls in the FX market, so does the USDT. However, the price of the fourth-largest crypto by market cap spiked in 2021.
The CoinMarketCap data revealed that Tether’s market cap jumped by 158% year-to-date, rising from $26.5bn in January to $68.3bn this week. Also, as the world’s most traded cryptocurrency, Tether saw its trading volume increase by 35% last month. In July, the world’s most used stable coin hit $1.48trn in monthly trading volume. Statistics show this figure hit over $2trn in August.
Binance USD Market Cap Soared by 742% YTD, the Biggest Increase Among Top Three Stablecoins
Stablecoins are essential for two areas in digital payments that do not prefer volatility. One of them is the Decentralized Finance or DeFi market that relies on cryptocurrencies for payments and loans.
Also, they are seen as the inspiration for so-called CBDC or Central Bank Digital Currencies, like China’s e-CNY currency or the digital euro, an electronic form of money issued by the Eurosystem.
Although far behind Tether as the world’s leading stablecoin, USD Coin has seen much more significant market cap growth this year. Statistics show the market capitalization of the second-largest stablecoin surged by nearly 400% over the past nine months, reaching $29.2bn this week.
Still, that was nearly twice less compared to Binance USD growth this year. In January, the combined value of all Binance USD coins stood at $1.48bn or almost 18 times less than the leading Tether. However, this figure soared to $12.5bn, showing an impressive 742% growth year-to-date.
Ethereum Adds Over 38 Million New Addresses in 2021, 22% of All Ever Created
The Ethereum network has recorded a surge in popularity, with more investors aiming to own part of the second-ranked cryptocurrency. The interest is highlighted by the number of unique new addresses created in 2021 alone.
Data acquired by cryptocurrency trading simulator Crypto Parrot indicates that an average of 149,843 new unique Ethereum addresses has been created daily in 2021 on a year-to-date basis. The highest number of new addresses was created on June 5th at 332,094. So far, in September, a total of 1,389,999 new unique addresses have been created.
Elsewhere, by September 2021, 38,256,193 new Ethereum addresses were created in 2021, accounting for 22.59% of all ETH addresses ever created to date. In general, the cumulative number of Ethereum addresses to be created since inception stands at 169,296,775.
Impact of Ethereum network upgrades on new addresses
Currently, the Ethereum network is undergoing upgrades geared towards transitioning from the proof-of-work protocol to the proof-of-stake system that is energy efficient.
The upgrades play a key role in determining the number of new Ethereum addresses created, and the report takes note of this factor. According to the research report:
“The drop in new addresses comes at a point the Ethereum network upgrade is expected to create a deflation over time as it modifies the auction process. Furthermore, with Ethereum transitioning to the proof-of-stake protocol, the network will likely experience an influx of new users who want to cash in on the staking.”
The new address follows the recent cryptocurrency bull market that saw Ethereum surge in value to a new all-time high price. However, the addresses have plunged in correlation with the general crypto market.
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