KuCoin advertises itself as one of the most secure and advanced cryptocurrency exchanges out there for a user to buy and sell Ethereum (ETH), Bitcoin (BTC), Litecoin (LTC), Tether (USDT), TRON, and more. However, this statement has aged like a fine milk, as the exchange has been hacked, and some $150 million in crypto may have been lost.
Hot Wallets Compromised; Cold Wallets Safe
KuCoin itself had confirmed this hack on the 25th of September, 2020, and explained that a variety of tokens, including Bitcoin and ERC-20 tokens, have been transferred. The crypto holdings had been moved out of the exchange from the hot wallets of KuCoin.
Even so, KuCoin was quick to do damage control, hammering home that its cold wallets were safe, even if its hot wallets were hit. Alongside this, the announcement claimed that KuCoin and its insurance fund would completely cover any user’s funding that happened to be affected by this.
The Warning Signs
As for how this all started out, the first signs that something was up, was when users started to voice their complaints that they were having various withdrawal issues.
The admin team of KuCoin had initially claimed that the system was experiencing an issue. A minimum of one admin had messaged users, indicating that they should refrain from depositing or withdrawing funds. The admin stated that these transactions simply stay pending.
However, it suddenly became clear that around $150 million in crypto had been moved to a different address entirely. $4 million in Ether (11,484 ETH), as well as $146 million in other tokens, had been moved to this mysterious address. A vast portion of these tokens were small fish in the crypto see, such as Chroma, Gladius, Hawala, and Ocean Token. However, big names were in the mix, as well, such as OMG, Maker, and YFI tokens.
Alongside this, Cryptoquant, a crypto data company, took notice of a large quantity of BTC leaving KuCoin’s wallets rather quickly, then stopping entirely. Since then, CryptoQuant took note that the outflow for those wallets has been continuously zero.
Seems @kucoincom is experiencing… issues.
$150M in funds was moved out of Kucoin to an unknown address.
— beta.mycrypto.com (@MyCrypto) September 26, 2020
Ki Young Ju, the CEO of CryptoQuant, stated that this is a telltale mark of an exchange being hacked. Should it have been a system crash, it wouldn’t have had a spike in traffic before going to zero, Ju speculated.
While this is an unfortunate case, it should be noted that hacks are an inevitability for groups moving large amounts of money. It will be KuCoin’s ability to financially recover, alongside preventing this from repeating in the near future, which will really show its mettle.