Hackers targeted cryptocurrency platform Poly Network and stole $611 million worth of crypto tokens. Poly Network confirmed the hack – suspected to be the largest decentralized finance (DeFi) fraud – on Aug. 10. The platform promised legal action against the hackers and called on crypto exchanges to block the stolen tokens.
A Cryptonews report provided a breakdown of the tokens the hackers stole. It said Ethereum tokens amounting to $273 million, Binance Smart Chain tokens worth $253 million and U.S. Dollar Coin tokens on the Polygon network worth $85 million were compromised. Given this, Poly Network urged miners of affected blockchain and crypto exchanges to "blacklist tokens" from three addresses the tokens were transferred to.
Poly Network pleaded with the hackers to return the stolen tokens. In a tweet addressed to the perpetrators, the platform said: "The amount of money you hacked is the biggest one in DeFi history. The money you stole are from tens of thousands of crypto community members."
"Law enforcement in any country will regard this as a major economic crime and you will be pursued. It is very unwise for you to do any further transactions," Poly Network warned the hacker. It invited the perpetrators to "talk … and work out a solution."
The crypto platform's plea appeared to work: It later said the hackers were ready to return the stolen funds but refused to say how much. Poly Network then instructed the hackers on where to return their stolen coins. Poly Network later confirmed that $260 million had been returned as of the afternoon of Aug. 11.
Talking to Reuters, a person claiming to be one of the hackers behind the incident said they did it "for fun." They added that the hack was meant to expose a vulnerability in the crypto token swapping platform. Nevertheless, the hacker clarified that returning the tokens was "always the plan" and that they are "not very interested in money."
Cryptos are no stranger to hacks and scams
Following the hack on Poly Network, other crypto exchanges moved quickly to prevent any security breaches. The Tether digital currency managed to freeze about $33 million tokens that were stolen during the Poly Network hack, its chief technology officer Paolo Ardoino tweeted. Stablecoins such as Tether were linked to assets like fiat currencies that do not change much in value.
Changpeng Zhao, CEO of crypto exchange Binance, acknowledged the Aug. 10 hack on Poly Network. He said in a tweet: "While no one controls [Binance Smart Chain or Ethereum], we are coordinating with all our security partners to proactively help. There are no guarantees. We will do as much as we can."
The Poly Network theft exceeded the DeFi sector's losses incurred from cybercrime for 2021 alone. From January to July of that year, DeFi registered losses amounting to a total of $474 million. (Related: Cryptocurrency scam hits hundreds of small investors.)
Dave Jevans, CEO of crypto forensics company CipherTrace, told Reuters: "Just eight months in 2021 and DeFi hacks, thefts and frauds have already surpassed the total DeFi crimes from 2020." Given these findings, Jevans warned that "regulators around the globe are paying closer attention to DeFi specifically."
True enough, the incidents involving the unregulated DeFi sector have attracted the attention of regulators. Last Aug. 3, Securities and Exchange Commission Chairman Gary Gensler called for new regulations on crypto and the DeFi sector. "This asset class is rife with fraud, scams and abuses in certain applications. In many cases, investors aren't able to get rigorous, balanced and complete information," he said.
Gensler also warned that DeFi and other crypto platforms enabled those aiming to sidestep the traditional banking system, anti-money laundering laws and tax compliance sanctions. He pointed out that unregulated crypto platforms may threaten U.S. national security in general. (Related: DoJ has elevated ransomware attacks to the level of terrorism as Biden admin cracks down on crypto thieves.)
BitRaped.com has more articles about hacking in unregulated crypto exchanges.
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