PARIS – Investigators are on the lookout for hackers who stole more than $600 million in cryptocurrency last week, tracking the funds as they flow through a financial system that critics have dubbed the "Wild West of finance."
They are, however, playing catch-up: the gaming company that was defrauded allegedly did not notice for six days.
The loss of about $320 million from the producers of Axie Infinity, a game where players may earn crypto through gameplay or trade their avatars, happened just weeks after a similar incident.
"We're seeing more hacks because there's more money in blockchain," said Roman Bieda, co-founder of Coinfirm, a crypto-security firm.
He went on to say that the business should have learned from prior breaches, but that security was still being traded for profit, and that Axie's failure to recognize the hack was a "major shortcoming."
REFUNDS HAVE BEEN GUARANTEED
The Axie Infinity attackers took advantage of flaws in the game's setup, which was put in place by Sky Mavis, a Vietnamese company.
The startup needed to tackle a problem: the Ethereum blockchain, which records ether cryptocurrency transactions, is slow and costly to operate.
Axie Infinity designed an in-game currency and a sidechain with a bridge to the main Ethereum blockchain to allow users to buy and sell quickly.
As a result, the process was quicker and less expensive, but it was also less secure.
Hackers were allegedly able to seize control of the sidechain and empty its coffers without anybody noticing, which experts believe would be nearly impossible on the Ethereum blockchain.
The company stated that it would recover or reimburse the payments, assuaging gamers' fears, especially in the Philippines, where hundreds of thousands of people play Axie Infinity.
"Some in the Filipino community are currently going insane as a result of what transpired," Dominic Lumabi, a Manila-based gamer, told AFP.
He expressed relief that Sky Mavis was being transparent, since some thought the game might close and money would be lost.
However, recovering the funds will be difficult for the company.
A NEVER ENDING WAR
Security firms are keeping track of the stolen funds as they pass through various wallets, or accounts in the crypto realm. Sky Mavis is tracking the money with the help of blockchain data firm Chainalysis, while Elliptic said it was investigating and informed its clients.
Coinfirm's Bieda predicted that the criminals will be apprehended sooner or later.
"The larger the sum, the more difficult it is to conceal," he told AFP.
Despite the fact that detectives can see where the money is, the burglars have a number of tricks up their sleeves. They can use software to mix stolen money with genuine streams, use exchanges with loose laws, or relocate their cash to a jurisdiction where there are no rules at all, such as North Korea or Russia.
Any of these actions makes it much easier to convert cryptocurrencies into usable cash.
According to Bieda, the thieves and those attempting to stop them are engaged in a "continuous war."
"Adoption (of cryptocurrency) is increasing, and more protocols and solutions are being developed, but the industry's desire for inexpensive transactions and profit sometimes leads it to neglect about security."
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