Bybit faces backlash from $1.5B cyber attack by North Korea

Bybit is currently facing the aftermath of a massive $1.5 billion hack, with the digital asset exchange finding itself in the midst of chaos and uncertainty. This record-breaking hack has sent shockwaves through the crypto world, leaving many questioning the security of their assets and the need for legal recourse in such situations.

On February 21, Bybit fell victim to a hack that resulted in the loss of over $1.4 billion worth of Ethereum’s ETH token, marking the largest exploit of its kind in the cryptocurrency realm. The alarming discovery of North Korea’s Lazarus Group as the perpetrators behind the attack was brought to light by blockchain researcher @ZachXBT, alerting the industry to the severity of the situation.

CEO Ben Zhou confirmed the exploit, revealing that malicious code was installed during the transfer of tokens from an ETH multi-sig cold wallet to a ‘warm’ wallet. This maneuver allowed the hackers to alter the smart contract logic, granting them access to Bybit’s cold wallet and subsequently transferring its entire contents to an external wallet beyond the exchange’s control.

In the wake of the hack, Bybit reassured customers that their funds were safe, but panic ensued, leading to a flood of withdrawal requests from anxious users. Zhou later disclosed that 70% of these withdrawals had been processed, but network congestion might cause delays in reuniting customers with their funds. Bybit later secured a bridge loan to manage withdrawals and received significant ETH deposits from various entities to stabilize the situation.

Despite Bybit’s attempts to contain the crisis, concerns lingered regarding the security of its other access points and potential vulnerabilities within its infrastructure. Speculation arose about possible infiltrators within Bybit’s ranks, with suspicions of moles influencing the breach. This alleged infiltration by North Korean hackers sheds light on the ongoing security risks faced by cryptocurrency exchanges worldwide.

While customers struggled to secure their funds on Bybit, the hackers swiftly proceeded to launder the stolen ETH by dividing it into smaller portions and transferring them across multiple wallets. The tokens found their way into various decentralized finance platforms, triggering fears of further obfuscation through coin mixers to conceal the illicit origins of the funds.

Bybit’s pledge to offer a reward for recovered tokens and acknowledgment of DeFi entities for aiding in the recovery effort was met with a notable exception from eXch, a non-KYC exchange entangled in the hack. The exchange’s defiant response to Bybit’s plea for assistance underscored underlying tensions within the industry regarding accountability and cooperation in combating cyber threats.

The scale and focus of the heist, exclusively targeting ETH, prompted discussions around the potential rollback of the Ethereum network to mitigate the theft. Drawing comparisons to the controversial 2016 rollback following TheDAO exploit, stakeholders debated the ethical implications of reverting the network to rectify the consequences of the hack.

In the aftermath of Bybit’s staggering loss and subsequent recovery efforts, the incident serves as a stark reminder of the vulnerabilities plaguing the cryptocurrency landscape. As the industry grapples with evolving cybersecurity challenges, the Bybit hack stands as a cautionary tale of the need for proactive measures to safeguard digital assets and uphold the integrity of blockchain platforms.