A recent security breach at WazirX, resulting in a staggering $230 million loss, has sent shockwaves through India’s cryptocurrency ecosystem. This incident has led to intense scrutiny of current security practices and crucial discussions about safeguarding digital assets in an increasingly risky environment. Users are concerned about the ease with which fraudsters can manipulate exchanges.

Dissecting the Hack

The incident ranks among the major hacks in the history of crypto exchanges and has left the crypto community pondering how easily fraudsters can manipulate crypto exchanges. One X user named Chandrashekhar wondered how “hackers can withdraw funds from the exchange, but legitimate exchange users cannot withdraw their own tokens or hold them in self-custody.”

The irony with Indian exchanges is that hackers can withdraw funds from the exchange, but legitimate exchange users cannot withdraw their own tokens or hold in self custody. WTH. @CoinDCX @WazirXIndia @WazirXCares @CoinSwitch #BTC #WazirXhacked #Wazirx @cryptoamanclub pic.twitter.com/PwFGNBN8cG

— Chandrashekhar B (@shekharbhujbal8) July 19, 2024

Another X user has termed the situation “horrifying” after WizirX circulated an email to users about the security incident. Vivek Naskar lamented: “Received this horrifying mail from WazirX. So whatever minuscule (and negligible) crypto investment I had, that is also gone (or frozen)! Today is the day of tragedies.”

Cyvers Alert identified the suspicious transactions, noting that each transaction’s caller received funds from Tornado Cash. Crypto investigator ZachXBT recently reported on his Telegram channel “Investigations by ZachXBT” that the suspected primary attacker still holds over $104 million.

“The WazirX incident highlights the importance of having comprehensive security measures for exchanges. The best way to ensure a full-proof safety net is by having a prominent monitoring and detection service, along with a proper crisis response protocol,” Meir Dolev, the Co-founder and CTO at Cyvers, told Finance Magnates.

After the WazirX multi-signature wallet breach, we immediately addressed the suspicious transactions with the team and are still investigating the incident with them.

This incident underscores the need for robust multi-signature wallet security and vigilant monitoring.

— Cyvers | Proactive Web3 Security (@Cyvers_) July 22, 2024

WazirX has launched a $23 million bounty program to recover over $230 million in digital assets lost during the cyber attack which occurred last week, 99Bitcoins reported. This initiative aims to incentivize the global community to provide actionable intelligence that can help retrieve the stolen funds.

WazirX Announces Bug Bounty

In a recent statement, WazirX announced rewards of up to $10,000 worth of USDT for any information leading to the freezing of the stolen assets. Additionally, the exchange has committed to offering 10% of the recovered amount as a white hat incentive, which could total up to $23 million.

We have received 133 entries for our Bounty Program so far and are currently reviewing them. Join us in supporting the crypto community and register now.

A $23 million bounty is available for solutions that effectively lead to a resolution.

Bounty details … pic.twitter.com/BF84zdihxY

— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) July 23, 2024

The breach targeted WazirX’s multisig Ethereum wallet, a crucial element of the company’s infrastructure. The suspected hackers reportedly exploited a discrepancy between the interface of Liminal, a digital asset security platform, and the actual transaction data, allowing them to siphon off the assets.

Following the incident, WazirX was forced to halt all withdrawals to contain the massive $235 million breach. The incident, linked to Tornado Cash, has now raised serious concerns about the security of decentralized finance platforms, the Economic Times reported. Web3 security firm Cyvers Alert revealed that they detected multiple suspicious transactions involving WazirX’s Safe Multisig wallet on Ethereum.

The attackers then executed unauthorized transactions, with initial investigations pointing to the Lazarus Group, a well-known hacking collective. These transactions, funded by Tornado Cash, a protocol known for enabling private transactions, resulted in the transfer of $234.9 million to a new address. The transferred funds, which included Tether, were then swapped to different tokens.