As we celebrate a quite successful 2019 in the crypto industry and enter the new year with new hope, hacks and scams across the industry remain a problem we have to face in 2020. Centralized exchanges and custodial wallets were the most targeted institutions across 2019 with investors losing over $500 million in the process. In this article we highlight some of the biggest hacks across the industry in the past year. Can 2020 be better?
Before commencing, remember Satoshi’s words in the Bitcoin whitepaper released in 2008:
“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”
The transaction of cryptocurrency through exchnages and custodial wallets breaks this very important rule. Remember, not your keys! Not your coins.
Quadriga CX boss ‘dies’ with keys worth $160 million
In wht was one of the most bizzare stories of 2019, Canadian cryptocurrency exchnage, Quadriga CX founder, Gerald Cotton, is said to have died with private keys of the exchnages cold wallet containing over 250 million CAD (~$190 million USD) in users funds. While the case remains uncovered on whether Gerry is actually dead or its another classic scam, users on the case remain optimistic of the recovery.
Coinbene loses over $100 million USD
News of a possible hack emerged in late April, a month following the exchnage’s announcement that they are undergoing maintenance. However, the closure which lasted over a month got the community suspicious and it was soon discovered a number of altcoins were stolen including huobipool token (HPT), pundi X (NPSX), maximine coin (MXM) and udoo (UDOO). Close to 1.2 billion MXM coins (~$118 million USD) and 18.4 million UDOO (~$209,000 USD) was lost.
The exchnage promised 100% compensation on the funds lost.
Crytopia loses $16 million USD
Australian exchange, Cryptopia NZ also suffered a hack that saw the exchange lose over $16 million in Ether (ETH) and ERC tokens. According to blockchain query engine, Elementus, a total of $3.6 million in ETH was stolen, with ~$2.4 million in Dentacoin, and almost $2 million in Oyster Pearl and a further $2 million in unspecified tokens stolen.
Over $26 million USD missing from Coinbin
South Korean cryptocurrency exchange, Coinbin, lost over $26 million over the course of 2019 in users funds. This led to the exchange declaring bankruptcy.
Binance exchange loses over $40 million
While some of the attacks on the exchanges listed above were worth much more than the $40 million USD Binance lost in the first half of the year, it was without doubt the most scrutinized. The largest cryptocurrency exchange lost over 7000 Bitcoins (~$40 million at the time) in users’ funds. Changpeng Zhao said,
“The transaction is structured in a way that passed our existing security checks,” he said. “Once executed, the withdrawal triggered various alarms in our system. We stopped all withdrawals immediately after that.”
Users were reimbursed through the secure Binance asset fund.
Canadian exchange loses ~6 million USD
Maple Change, a Canadian based cryptocurrency exchange announced about $5.6 million USD in investors cryptocurrency assets was stolen on the exchange much to the disbelief of users. While the exchange remained open for users to withdraw their remaining amounts, no significant trading is happening on the exchange.
Upbit exchange loses 400,000 ETH
The last major attack on crypto third party exchanges was Upbit exchange, which lost approximately 342,000 ETH (~$38 million USD) in November. The hackers have moved the coins to different exchanges with the latest move seeing over 1000 ETH moved to an unknown wallet.
As we enter 2020, one key lessons that traders and investors in the field should learn is to store their large crypto holdings away from third party wallets. Notwithstanding, exchanges should store their digital assets in cold wallets to avoid the extensive targeting of their hot wallets holdings. Safe New Year crypto folks!