Crypto hacks, stolen funds in decline, report says

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According to a recent report by blockchain intelligence company TRM Labs, approximately $400 million was stolen from various crypto projects over 40 separate attacks in the first quarter of 2023. The figures represent a significant decrease of 70 percent compared to the same period in the previous year.

TRM also noted that the average size of the hacks had decreased, dropping from $30 million in 2022 to $10.5 million during the same period in 2023. Interestingly, hackers increasingly return the stolen funds and opt for a “white hat” reward from the projects they exploit. TRM Labs estimates that hack victims could recover almost half of the stolen funds in 2023.

An example is a hacker who took advantage of the TenderFi protocol. This hacker gave back half of the $1.6 million from the attack, as TenderFi offered a bounty reward of $850,000.

Similarly, the person responsible for exploiting the Euler lending protocol agreed to return the entire $200 million worth of cryptocurrency they had absconded with. These two incidents happened in March.

In April, the hacker who drained the Safemoon protocol returned $7.1 million worth of crypto, opting to retain the remaining $9 million of their loot.

Regulatory focus on crypto hacks

TRM Labs suggests that the rise in regulatory focus on crypto hacks and the occurrence of prominent enforcement cases could explain the observed trends.

One contributing factor is the increased implementation of stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) policies by crypto exchanges. These measures make it more challenging for hackers to convert stolen coins into cash.

For example, crypto exchanges now automatically flag all funds associated with the Tornado Cash protocol, which used to be a popular tool for money laundering with Ethereum. Hackers used Tornado Cash to obscure the origin of stolen funds, such as the $600 million hack of Axie Infinity in March 2022 and a $100 million attack on Harmony’s Horizon Bridge in June 2022.

According to TRM head of legal and government affairs Ari Redbord, the advancements in tracking and tracing stolen funds have also significantly improved. As a result, a new environment has emerged where hacked funds are being publicly tracked in real-time.

Redbord claimed that malicious hackers encounter growing challenges when cashing out their illicitly obtained funds. That’s why they are opting for bug bounties as an alternative solution.

There is also a noticeable rise in the participation of “white hat” hackers within the ecosystem. This trend could serve as a valuable means for DeFi services to reinforce cybersecurity measures.

However, crypto users should not become complacent despite declining crypto hacks. TRM Labs noted a significant decrease in crypto hacks during the third quarter of 2022, which was followed by a surge in the fourth quarter, resulting in a “record-setting number of hacks.” Consequently, 2022 became a year characterized by unprecedented hacking incidents.

The report mentioned that, unfortunately, the decline in crypto hacks would likely be a short-term relief rather than a long-term trend. It maintained that even a few powerful, large-scale attacks could disrupt the current trajectory and shift the balance towards increased hacking activities.


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