September 26th, the Kucoin crypto exchange announced that hackers have stolen crypto assets worth over $150 million. Over the next few days, the hacker had been exchanging the tokens stolen for eth and many of the projects whose tokens were stolen had initiated forks to invalidate the funds. Others blacklisted the addresses so the funds will remain useless.
According to transcripts from a live stream with Kucoin CEO, Johnny Lyu on the same day regarding the security breach, it was stated that the funds stolen are from the exchange’s hot wallets and they are a small percentage of the total funds in the exchange’s custody. He stated that users should not be worried that the exchange will cover all losses. The remaining funds in the hot wallets have been relocated to new hot wallets.
To recover stolen funds, he stated that the exchange has been in communication with other crypto exchanges and law enforcement to take necessary actions:
“We are in contact with many major crypto exchanges such as Huobi, Binance, OKEx, BitMax and Bybit, as well as blockchain projects, security agencies, and law enforcement to work on this. Some effective measures have been taken, and we will update with more details soon.”
However, in a recent revelation from Larry Cermak Director of research at The Block, it was reported that the estimate of the stolen funds from Kucoin is wrong. He estimated it to be approximately $280million which could be the third-largest hack in history. He wrote:
“So I did some accounting of the KuCoin hack based on the wallets very likely associated and based on my estimation, there was nearly $280 million of assets stolen, not $150M. This would make it the third-largest hack in history and 7 times larger than the Binance hack last year..”
From his report, he stated that about 50% of the total hack is likely to be recovered and that it is almost impossible to recover the stolen funds with insurance.
“Yes, some of these tokens have been frozen, forked, and blacklisted. And the amounts above don’t reflect that. But it’s quite odd to me that KuCoin is confident they can cover these amounts with the insurance fund. My opinion is that there is almost no chance this is recoverable”
If the stolen funds are a “small” percentage of Kucoin’s funds as stated by Johnny Lyu on 26th September, there is hope that even if the stolen funds are not recovered, Kucoin will be able to cover the loss in no time.
The issue of the hack has re-surged discussions around Decentralized Exchanges versus Centralized Exchanges options, and the basics of what Decentralization and immutability of the blockchain is. This is because of the actions of the projects involved that frozen and forked to keep out the hacker so the funds are recovered. The majority are in support of these actions to keep the loss at the barest minimum.
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