Celsius Network Loses Millions in BadgerDAO Bitcoin Heist Amid Crypto Sale

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Cryptocurrency lender Celsius Network lost funds in a recent hack, the latest decentralized finance (DeFi) attack that comes amid a large cryptocurrency downturn.

On Wednesday evening, BadgerDAO, a Decentralized Autonomous Organization (DAO) that builds DeFi products using Bitcoin as collateral, announced on its Discord that it would shut down its products after reports of “unauthorized withdrawals of funds from ‘users’.

During a “ask me anything” (AMA) session on Friday, Celsius Network CEO Alex Mashinsky acknowledged the theft, but did not confirm the amount of crypto stolen. Yet, via Etherscan data, up to 594 BTC of stolen funds have been linked to a wallet linked to the Celsius network.

At Friday’s close, that translated to at least $ 32 million worth of Bitcoin (BTC-USD) – and is likely to be even higher based on information known to the Celsius Network wallet, members of the BadgerDAO community and a growing sale of digital coins which drove Bitcoin below $ 50,000 on Saturday.

“It wasn’t a Celsius hack. It was a Badger hack. But some of the Celsius funds were there, so Celsius lost money. But none of the Celsius [customers] lost money, ”Mashinsky insisted in a live YouTube AMA. “We are working with Badger to recover these funds,” he added.

The loss of the company is the latest development in the cryptocurrency-related BadgerDAO hack valued at at least $ 115 million. It comes during a volatile period in which more and more crypto investors are looking for investment opportunities beyond Bitcoin, seeking to take advantage of the move towards non-fungible tokens and Challenge.

Meanwhile, the rise of the Omicron variant of COVID-19 has rocked the markets, pushing down cryptocurrencies across the board.

Not a “covered event”

The representation of Bitcoin is seen with a binary code displayed on a laptop screen in this illustrative photo taken in Krakow, Poland on August 17, 2021. (Photo by Jakub Porzycki / NurPhoto via Getty Images)

As investor interest soars and regulators try to find a way to protect them, illicit flows of crypto have become a growing concern. Last month, the IRS announced that it had seized some $ 3.5 billion of cryptocurrency-related fraudulent activity.

BadgerDAO alerted law enforcement in the United States and Canada, in addition to seeking help from blockchain forensics company, Chainalysis. The group determined that between $ 115 million and $ 120 million in Wrapped Bitcoin (WBTC), a symbolic representation of Bitcoin on the Ethereum blockchain (ETH-USD), had been stolen. The stolen funds have been traced to pseudonymous addresses on the Ethereum blockchain.

Although the investigation is ongoing, the attackers appear to have slipped malicious code into the application programming interface (API), according to administrators and members of BadgerDAO.

“It was an achievement for their API. And the attackers used the badger bridge product to convert the stolen funds into Bitcoin, ”a spokesperson for Chainalysis told Yahoo Finance.

Meanwhile, depending on the type of theft, the DeFi insurance provider Nexus Mutual said this week that the attack “Would not be a covered event” – suggesting that BadgerDAO may not be fully funded. Currently the members of BadgerDAO report there are still 249 accounts “granting approval to known hacker address”, meaning more funds could still be stolen.

So far this year, over $ 700 million worth of cryptocurrency has been stolen from the DeFi segment of the crypto industry. The level of theft is one of the reasons Securities and Exchange chairman Gary Gensler recently told Yahoo Finance that DeFi “is going to end badly” unless the freewheeling market gets more guard – crazy from regulators.

Celsius Network’s disbursement for the stolen funds comes just after the loan company recently announced an additional $ 350 million raise in its latest round to a valuation of $ 3.25 billion according to Coindesk. At the time, the company stressed that the additional funds would boost its credibility with regulators.

David Hollerith covers cryptocurrency for Yahoo Finance. Follow it @dshollers.

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