Kucoin Hacker funnels stolen funds using Uniswap, may trigger regulators to turn attention on DEX

Hacker started swapping other altcoins to ETH with Uniswap. The altcoins including OCEAN, COMP, SYX and others were among the most swapped.

By · Sep 28, 2020 . 8min read

Kucoin hacker latest news
Source : IStock

The hacker who breached Kucoin crypto exchange security systems and moved over $200 million from its hot wallets into his wallet is now funnelling the funds using Uniswap.

As we earlier reported, Kucoin exchange was hacked on September 26 and Johnny Lyu, the exchange’s CEO stated that the losses could amount to up to $200 million. While he assures that Kucoin will cover all losses through the exchange’s insurance fund, it’s already taking steps to recover some funds to minimize the damage caused by the hacker(s).

Kucoin hacker(s) have found a safe haven in Uniswap where the hacker is aggressively swapping the stolen assets into ETH. According to Larry Cermak, The Block’s Research Director, the hacker started swapping other altcoins to ETH with Uniswap. Ocean Protocol’s OCEAN was the first victim in the fallout. Hacker transferred 200,000 OCEAN and successfully swapped 130,000 units of OCEAN in 10k batches before the Ocean’s team paused their contract. Consequently, OCEAN’s token price dropped by over 4% across exchanges.

Kucoin hacker then moved to start dumping Synthetix token – SNX on Uniswap for ETH. In 2k batches, the hacker dumped SNX as he moved 540,000 from the main hack wallet to an unknown wallet. This is worth roughly $2.7 million.

COMP, the governance token for Compound Protocol was next. Roughly $14 million in COMP token is within his possession. Kucoin hacker swapped at least 14,000 COMP on Uniswap which is valued around $1.9 million.

Kucoin Hacker funnels stolen funds using Uniswap, may trigger regulators to focus attention on DEX
Kucoin Hacker wallet from Etherscan

ERC-20 projects affected rush to freeze contracts in a bid to stop Kucoin hacker dumping effect on Uniswap

While hacker was racing to swap to ETH which could be easily laundered, Kucoin enjoyed solidarity support from Bitfinex as well as Tether. Both froze a total of $33 million in ERC-20 tokens and USDT. As well, Kucoin CEO coordinated with VIDT_Datalink to freeze VIDT tokens worth $14 million. Covesting also froze roughly $560,000 of its COV tokens the hacker holds. Silent Notary also worked with Kucoin to freeze and recover $100,000 worth of SNTR tokens. In all, Lyu said Kucoin has frozen and recovered at least $129 million of tokens stolen by the hacker.

Regulators may unsettle with the way hackers could use Uniswap to launder funds anonymously.

With the way Kucoin hacker is swapping token anonymously using Uniswap, this may cause regulators to beam their searchlights on the DEX. Already, Uniswap stands toe-to-toe with big exchanges like Coinbase and Binance in terms of trade volume. It had at one point surpassed Coinbase in daily trade volume facilitating close to $14 billion in September till date. Surely, this kind of volume and hackers turning it into a den of thieves may not be able to pass unnoticed to regulators for long. They may decide to look for a way to interfere even though it appears there’s little to nothing they may be able to do.

Kucoin hack with at least $200 million moved ranks third in the list of exchange hacks. Coincheck, a Japanese crypto exchange is number one. Hackers successfully moved $534 million in 2018 during a security breach. The infamous Mt Gox comes in the second where stole $460 million in 2011, leading to a massive market dump. BiitGrail security breach led to losses amounting to $196 million, placing it on the fourth position.

In all, the market seems to have matured and immune to security breach news like this. While Mt Gox led to severe market bleeding as well as Coincheck, surprisingly Kucoin hack did not. As at press time, BTC is trading at $10,819 while ETH was relatively stable in pricing, trading at $358.90.

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