Upbit exchange hacker relieved of ill-gotten gains

After Whale Alert tweeted a warning that $27,000 in ether stolen from Korean exchange Upbit last year had been sent to his exchange, Binance CEO Changpeng “CZ” Zhao acted quickly

Blockchain tracker Whale Alert teamed up with Binance CEO Changpeng “CZ” Zhao, moving quickly this afternoon to freeze about $27,000 worth of allegedly stolen ether.

At 12:06 p.m. on May 13, @whale_alert tweeted out a warning that 137 ethers (ETH) stolen from the South Korean Upbit exchange last November had been transferred to a wallet address on Binance, the world’s largest cryptocurrency exchange by volume. 

The orca is watching (Photo: twitter).

Just 14 minutes later, the exchange’s billionaire boss replied, “On it.”

16 minutes after that, at 12:36 p.m., Zhao reported that the funds had been frozen, and both Upbit and law enforcement were being notified. One the report is verified, he added, the ill-gotten gains will be handed back to the exchange.

Somewhat cynically, Zhao added, “Waiting for someone to complain on social media about us freezing funds. But fight bad actors, we must.”

CZ does like his Twitter (Photo: Twitter).

Once bitten, twice shy

It’s an understandable sentiment.

The last time Zhao moved quickly to stop a hacker, it came back to bite him, as it turned out that the alleged “hack” was actually a sneaky hostile takeover of the Steem blockchain by Tron boss Justin Sun. 

After feuding with the delegated proof-of-stake (DPoS) blockchain’s governing “witnesses” Sun convinced two large exchanges, Binance and Huobi, that Steem was under attack by hackers. They lent Sun votes from all of their customers’ Steem tokens, letting him oust the witnesses. 

Several days later, CZ had to apologize, tweeting out that Binance’s steem votes had been reversed. He took the blame for the “oversight on my part,” blaming “Miscommunication/upgrade rubber stamp.” Huobi also reversed its vote, but the damage was done and Steem was hard forked to Hive, taking many users with it.

Upbit Upfront

At 4:06 a.m. ET on Nov. 27, 2019, a hacker accessed Upbit’s hot wallet, transferring 342,000 ETH worth roughly $50 million at the time to an anonymous wallet, the exchange said in an investors note explaining the unscheduled suspension of all cryptocurrency deposits and withdrawals. That’s currently about $68 million.

Apologizing for the inconvenience, Upbit said all digital assets had been moved to cold storage, and it would make good the 342,000 ETH from its own funds. It added that the exchange would remain closed for two weeks.

Upbit also asked “for the crypto community’s support in blocking deposits from the anonymous address.”

While it got that support in just a half hour, the crypto recovered is a drop in the bucket—0.04% of the 342,000 ETH lost, to be precise. And the wallet that transferred the 137 ETH to Binance still has more than 1,902 ETH, currently worth more than $377,000. 

Still, it’s also a setback for the thief and a potential lead for authorities, as Binance does have good “know your customer” (KYC) standards. Law enforcement has been getting better at tracking cryptocurrency, with notable successes recently including tracking Bitcoin transactions to a child pornographer and an online drug dealer.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.