Top-5 Exchange HACKS of All Time — Funds Are NOT SAFU
Where money is, there is also danger, and cryptocurrency exchange hacks will always be a threat, reminding us that funds are not "safu" when we park our coins in centralized services.
The notorious North Korean hacking team, Lazarous Group, is often accused of hacking cryptocurrency exchanges exploiting DeFi contracts, and even attacking decentralized bridges.
The list presented here doesn't contain DeFi-related hacks or bridges but centralized exchanges in the traditional meaning of holding access to crypto funds in a custodial approach and offering trading options.
DeFi hacks, rug pull scams, and bridge exploits are different and unrelated to custodial services centralized exchanges offer.
In most cases, the customers suffered vast losses while the executives were merely affected by the lack of security and oversight of their platforms.
1. Mt. Gox Hack 2010-2014: ~ $13 Billion (at the current price, 650,000BTC)
Mt.Gox suffered multiple hacks from 2010 to 2014, when it shut down and filed for bankruptcy. Mt.Gox was one of the early cryptocurrency exchanges created by Ripple's founder Jed McCaleb, who sold it in 2011 to Mark Karpeles. Mt.Gox, at the peak of its popularity, managed 80% of the total Bitcoin trading volumes.
After the shut down of Mt.Gox in 2014, Karpeles recovered 200,000BTC from a cold storage wallet. The Mt.Gox creditors now anticipate the release of this BTC after finally reaching an agreement with the trustee and the rest parties involved.
The price of BTC is currently approximately a hundred times higher, and when released they will provide an outstanding return for the seven years of "force hodl" to their owners.
During the summer of 2017, Greek police, at the behest of the FBI, arrested Alexander Vinnik, who was vacating the region. Alexander Vinnik is considered the main engineer of the (FBI seized) BTC-e exchange, which according to authorities, was used to launder part of the stolen Mt.Gox Bitcoins.
The Vinnik case reached unforeseen diplomatic significance since multiple governments demanded Vinnik's extradition (France, USA, Russia). While the "hacking" charges were dropped, he is currently serving five years of jail time in France, although also waiting for extradition to the US.
The Mt.Gox story contains many more chapters and will keep creating drama and intrigue.
2. Bitfinex Hack - 2016: $2,3 Billion (~120,000 BTC)
As with every other business or incident connected with iFinex, transparency and informing the public is not the main concern of the executives.
Moreover, it is a story that every new information published makes it even more bizarre and difficult to conclude what actually happened.
The BitFinex hack is still one of the most mysterious incidents that shocked the market in 2016, becoming the second biggest heist in the cryptocurrency field, just a couple of years after the Mt.Gox collapse.
In August 2016, Bitfinex was hacked with hackers emptying multiple wallets leading to approximately 120,000BTC stolen from BitFinex customers.
In February 2022, two arrests shocked the crypto industry (Ilya “Dutch” Lichtenstein and Heather R. Morgan) as the private keys to the remaining 100,000BTC retrieved by authorities (unclear how).
These Bitcoins from the Bitfinex hack is now at the hands of US authorities, and it remains how these Bitcoins will be distributed and what the stance of Bitfinex will be, as the exchange claims it has fully reimbursed its customers.
3. CoinCheck Hack - 2018: $534 million in NEM (2018 value)
The largest crypto-heist in 2018 happened on the Tokyo exchange CoinCheck.
Most of the $530 million worth of cryptocurrencies were NEM tokens, a cryptocurrency enjoying an incredible run in 2017, generating large trading volumes.
The exchange was holding massive amounts of NEM and other cryptos in hot wallets, a dangerous approach considering security. The executives rejected the possibility of an inside job and promised to reimburse all of their customers.
Securities company Monex bought the exchange during the same year,
and is now planning an IPO and listing on Nasdaq in Q2, 2022.
4. KuCoin Hack 2020: $285 million in various cryptocurrencies (recovered)
The Kucoin hack was shocking as the stolen amount was the third-largest in crypto and appeared during the beginning of another crypto-bullish cycle, with cryptocurrencies other than Bitcoin (BTC) leading the race (altcoin season).
Kucoin is the only exchange that recovered all of the stolen cryptocurrencies.
Rumors circulated the web, with the most popular one expressing the argument, that the Kucoin hack was an inside job.
5. BitGrail Hacks 2018: ~$145 million (2018) in cryptocurrency Nano
A rather bizarre hack in the top Italian cryptocurrency exchange in 2018, since all the evidence points to an inside job.
17 million Nano (ex-Railblocks) was stolen, with Nano at the time of the hack valued at $10 each. The exchange went offline, with the exchange owner being the prime suspect of this heist.
Reports by users of the exchange suggested a gradual limit of withdrawals to 10BTC daily, with the exchange lowering this limit to 1BTC daily days before it went offline.
Eventually, the Italian accused the owner of BitGrail as responsible for the hack:
a 34-year-old man from Florence named only as "F.F."
Special Mention:
Binance Hack- 2019: $40 million ($135m today, 7,000 BTC)
A hack that turned out to be worth ten times more two years later.
According to Binance, the attackers used highly sophisticated phising methods, bypassing Binance's security systems.
The hackers stole 7,000BTC from the exchange, which at the time of the incident (May 2019) valued at $40 million.
An obscure development transpired when ChangPeng Zhao (CZ) openly discussed terms of a blockchain rollback to return the funds. CZ mentioned discussions with Jihan Wu over the matter, and while (at the time) Bitmain controlled 50% of Bitcoin's hashrate, Jihan Wu explained the negative outcome of any such decision and rejected this request.
In conclusion: A Neverending List Of Centralized Hacks
Funds are not SAFU when trusting a centralized exchange with access to our crypto.
Cryptsy, Quadrica, EXMO, Cryptopia, Livecoin, Bitcoinica, Zaif, Bithumb, and a hundred more exchanges suffered serious hacks, sometimes proven to be an inside job.
Sometimes an exchange declares a hack as the anonymous operators disappears with all their customers' funds.
Moreover, besides the theft of cryptocurrencies, exchanges constantly suffer from breaches of databases, with private information leaked and sold on the dark net.
Major exchanges have suffered such leaks, yet we don't read about these breaches. These leaks lead to massive personalized scam campaigns, as was the case of Ledger's database hack, which included even telephone numbers of KYC'ed customers.
Exchanges have proven to be a liability for users still most cryptocurrency investors or users "park" their crypto in exchange wallets, thinking this approach is safer than holding the keys.
The private key is the core waiting to happen, providing access to move coins in the blockchain. Handing out this access to third parties instantly cancels this revolutionary feature. Private keys are the vehicle for our financial freedom.
The next "big" hack is just around the corner.
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