KuCoin hack unpacked: More crypto possibly stolen than first feared

Johnny Lyu, the CEO of Singapore-based cryptocurrency exchange KuCoin, stated on Sept. 26 that the exchange had been on the receiving end of a major hack that resulted in the firm's Bitcoin, Ether and ERC-20 hot wallets being affected.

"Following the incident, KuCoin is acting quickly and transparently to deal with it. We are trying our best to mitigate the impact of the incident by working with many blockchain projects, security firms and crypto exchanges."

On a more technical front, Cai highlighted that a total of 130 million of the stolen digital tokens had already been secured or in the process of being recovered by the KuCoin security team.

The crypto exchange was facing the possibility of a class-action lawsuit that claimed KuCoin provided its customers with "False and/or misleading statements." Similarly, as part of another suit - Chase Williams v. KuCoin - it was alleged that the exchange was dealing unlicensed securities, which is illegal.

Addressing these concerns, Cai stated: "KuCoin a genuine platform backed by famous VCs. As early as 2018, we got an investment of $20 million from IDG and Matrix Partners. IDG is very 'picky' when investing in crypto exchanges."

He pointed out that most of the cryptocurrencies stolen from KuCoin were ERC-20 tokens that can be easily laundered through DeFi protocols.

"This was the first high profile case of a DEX, Uniswap, being used as a money mixer. Unlike centralized exchanges, a DEX can't freeze funds - only specific projects can. Another significant impact here is that the theft of the tokens directly impacted the firms of these stolen tokens, such as Crypterium and Tether because the hack included CRPT tokens and Tether on both EOS and Ethereum blockchains."

Madeleine Kennedy, senior director of communications at Chainalysis - a global cryptocurrency analytics company - pointed out that her firm has found that more than $275 million in crypto funds have most likely been compromised, which makes this one of the largest hacks of a cryptocurrency exchange in recorded history.

Despite the major strides that have been made by crypto security researchers over the past couple of years, platforms like KuCoin's still fall victim to such attacks.

"As more and more mainstream investors get involved in crypto, there will be more vulnerable participants in the ecosystem, and exchanges have to do even more to protect these customers and help them protect themselves."