Bybit, a major cryptocurrency exchange, suffered a massive hack in February, losing roughly $1.4 billion in crypto. CEO Ben Zhou recently gave an update on the situation.
The Heist
The hack, attributed to the Lazarus Group, involved the theft of approximately 400,000 ETH-related tokens and other assets. This ranks as one of the largest crypto exchange hacks ever.
Recovery Efforts and the “Dark” Funds
Zhou reported that while 77% of the stolen funds are still traceable, a concerning 20% has “gone dark,” meaning they’re untraceable. Another 3% has been frozen. The hackers are actively converting ETH to Bitcoin and moving it through various wallets.
Decentralized Protocols Under Scrutiny
A significant portion (72%) of the ETH conversion happened through THORChain, a decentralized liquidity protocol. This surge in activity led to record transaction volumes on THORChain, raising serious questions about the role of decentralized platforms in facilitating illicit activities.
One THORChain member even resigned, citing concerns about the platform’s use in money laundering. A proposal to temporarily halt Ethereum transactions on THORChain is under consideration, though no decision has been made yet. Other decentralized exchanges, like Chainflip, have taken more immediate action, temporarily halting services to prevent further movement of stolen funds and planning upgrades to improve security.
The Challenges
A large portion of the stolen ether has been routed through less regulated channels, making tracking difficult. For example, a significant amount was processed through a non-KYC exchange (eXch) and another large sum went through the OKX Web3 proxy. The FBI is also involved, urging exchanges to block the Lazarus Group from accessing further funds.
The Bottom Line
The Bybit hack highlights the ongoing tension between the decentralized nature of crypto and the need to prevent criminal activity. The situation is still developing, with the recovery efforts focusing on tracing and freezing the remaining accessible funds. The fate of the “dark” 20% remains uncertain.
