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Cypher Protocol successfully freezes $600,000 in stolen cryptocurrency funds on CEX

TL;DR

  • Cypher Protocol froze $600,000 in stolen cryptocurrency after a security breach on August 7, where $1 million in assets were drained.
  • The team partnered with investigators and offered a 10% bounty to the hackers but did not recover the funds. A redemption plan was introduced to support affected users.

In a significant move to safeguard its platform, Cypher Protocol, a decentralized future exchange operating on the Solana blockchain, has successfully frozen more than half of the funds stolen in cryptocurrency during a recent security breach. As of August 18, Cypher Protocol’s team has effectively frozen nearly $600,000 in cryptocurrency, which had been unlawfully taken from various centralized exchanges. 

The achievement was made possible through a collaboration with several independent blockchain investigators. Cypher emphasized that the recovery of these funds depended on the cooperation of the centralized exchanges involved and the issuance of seizure warrants by law enforcement authorities.

Cypher expressed gratitude to blockchain sleuth ZachXBT, highlighting his invaluable contribution to the Cypher team and his role in the initial freezing of funds across multiple centralized exchanges (CEXs).

The Incident and response

On August 7, Cypher became the target of exploitation, leading to a loss of approximately $1 million across a range of cryptocurrency assets, including USDT, SOL, wETH, and several other altcoins. In response to the incident, the protocol had to pause its smart contracts.

Cypher extended a white hat bounty of 10%, amounting to approximately $120,000, to the contracted hackers. However, the hackers did not meet the stipulated deadline for returning the funds. Consequently, Cypher formulated a redemption plan and introduced a “socialized losses policy” to allocate the remaining assets to affected users.

The road to recovery

The Solana-based decentralized futures exchange managed to freeze the stolen funds with the help of independent blockchain investigators. The attacker had exploited code vulnerabilities using multiple accounts to drain an estimated $1 million in various crypto assets.

On August 10, the team made contact with the hacker after offering a 10% white hat bounty. Two days later, the protocol announced that the hacker had missed the deadline to return the funds and opened the bounty to the public. They also hinted at knowing the partial identity of the exploiter.

On August 16, Cypher announced a redemption plan and “socialized losses policy” to distribute remaining assets to affected users. A redemption package with protocol assets would be distributed pro rata based on user share.

There is no doubt that the successful freezing of stolen funds by Cypher Protocol marks a significant step in the ongoing battle against cyber theft in the cryptocurrency space. Also, the collaborative effort with independent investigators and the decisive actions taken by the Cypher team demonstrate a robust response to this devastating hack. 

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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