Arkham reports $20M hack of U.S. government-linked crypto wallet

Hackers reportedly stole $20 million from a U.S. government-linked crypto wallet of seized funds.
Complex laundering tactics involve nested exchanges using Binance liquidity for fund transfers.

As a researcher who has spent years immersed in the dynamic world of cybersecurity and cryptocurrencies, I find myself increasingly alarmed by the growing number of threats that plague this rapidly evolving industry. The recent hack on a U.S. government-linked crypto wallet is yet another stark reminder of the vulnerabilities inherent within the digital asset space.

The increase in cryptocurrency use has regrettably coincided with an uptick in fraudulent activities and cyber threats, underscoring potential weaknesses within the realm of digital assets.

U.S. government linked crypto wallet under threat

It’s been reported that hackers managed to gain unauthorized access to a digital wallet connected with the U.S. government which contained Bitcoin funds previously seized from Bitfinex.

According to the findings of blockchain intelligence firm Arkham, they allegedly made off with around $20 million worth of different digital assets such as Tether (USDT), USD Coin (USDC), and Ethereum (ETH).

Additionally, it was highlighted that the thief swiftly exchanged the pilfered stablecoins for Ethereum (ETH) and moved them via several addresses labeled as “Deposits to Binance,” suggesting an attempt to disguise the origin of the funds.

As an analyst, I’ve observed that the transferred funds have been deposited into wallet 0x348. It appears this wallet is now liquidating the funds into Ether (ETH). Our suspicion is that the initial owner of these funds has started the process of laundering the proceeds. This involves moving the funds through potentially illicit addresses, which are known to be associated with a money laundering service.

Unexpectedly, the crypto community responded with a wave of humor upon hearing the news.

Arkham reports $20M hack of U.S. government-linked crypto wallet

Arkham also pointed out that shortly before the hack, the U.S. government withdrew $5.4 million from Aave. It added,

“This is their first activity on this address in 8 months.”

The Bitfinex hack- Explained

Back in 2016, I found myself at the center of an intriguing incident as a researcher. Ilya Lichtenstein and Heather Morgan masterminded a significant cyber heist on the Bitfinex exchange. Their actions led to the seizure of around 120,000 Bitcoin [BTC], currently estimating to be worth a staggering $8.2 billion.

2022 saw the apprehension of those individuals by U.S. officials, which resulted in the confiscation of the ill-gotten funds. This significant event represented the biggest ever digital asset recovery undertaken by the Department of Justice.

Following their agreement on a plea bargain in July 2023, both individuals confessed to accusations of money laundering and conspiring against the American government. As a result, they now face potential leniency in their sentences.

As a researcher examining this case, I can say that the prosecution has recommended a 18-month imprisonment for Morgan. This suggestion is primarily based on her less significant involvement in the scheme, as well as her collaboration with law enforcement agencies.

Instead of serving a 20-year term, it’s anticipated that Lichtenstein will get a five-year sentence due to his cooperation with investigators and the absence of previous criminal charges against him.

ZachXBT steps in

In simpler terms, the pseudonymous blockchain analyst known as ZachXBT commented on Arkham’s report, calling the hack “malicious” and stating that it was undeniably a matter of stealing funds.

It was noticed that the hackers transferred Ethereum in amounts of approximately $40,000 each to an address that seemed connected to Binance, which appeared to function as a receiving account.

Later on, he explained that these transactions actually traveled through what’s known as a “nested exchange” structure. Instead of interacting directly with the Binance platform, he utilized Binance’s liquidity resources for these transactions.

“It’s not Binance it’s a nested exchange which uses Binance for liquidity.”

Adopting this subtle strategy reveals how intricate money laundering operations can conceal the precise route of ill-gotten cryptocurrencies within the digital financial sphere.

2024-10-25 14:48

U.S. government linked crypto wallet under threat

The Bitfinex hack- Explained

ZachXBT steps in

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