Crypto Assets exchange security incident review: lessons and insights

In recent years, centralized crypto assets exchanges have frequently suffered security incidents, resulting in huge financial losses. These incidents include external hacker attacks and issues such as internal fund abuse. At the same time, the decentralized exchange (DEX), with its inherent structure, has demonstrated unique advantages in preventing hacker attacks, fraud, and regulatory risks. This article reviews the ten most serious security incidents involving centralized exchanges and discusses the lessons and insights learned from them.

Bithumb: Repeatedly Attacked by Hackers

As an important participant in the South Korean Crypto Assets market, Bithumb has suffered multiple hacker attacks since 2017:

• February 2017: Lost 7 million USD
• June 2018: Employee personal information was exploited, resulting in a loss of nearly $32 million
• March 2019: EOS and XRP were stolen, resulting in a loss of approximately 20 million USD.
• June 2019: Attacked again, lost 30 million dollars

In response to these incidents, the South Korean Ministry of Science and Technology launched an investigation and found issues such as inadequate network isolation, poor monitoring systems, and improper management of encryption keys at Bithumb.

WazirX: Serious Wallet Vulnerability

In July 2024, the Indian exchange WazirX suffered a significant wallet vulnerability attack, resulting in over $230 million in Crypto Assets being stolen. The attackers stole a large amount of SHIB, MATIC, PEPE, USDT, and GALA coins. Despite implementing security measures such as hardware wallets, WazirX was still unable to withstand this complex attack, highlighting the risks associated with centralized control of private keys.

Some exchange: API key stolen

In May 2019, a globally renowned exchange suffered a hacker attack. The attackers used phishing and virus attacks to obtain users' two-factor verification codes and API keys, stealing 7,074 bitcoins from the hot wallet in a single incident, worth over 40 million dollars. The platform subsequently established a user security asset fund to address extreme situations. However, in October 2022, the platform faced another security breach costing 570 million dollars.

KuCoin: Hot Wallet Private Key Stolen

In September 2020, KuCoin experienced a major security incident, where hackers stole approximately $281 million worth of various Crypto Assets by compromising the private keys of hot wallets. KuCoin quickly took measures to transfer remaining funds and freeze trading. After several weeks of effort, about $204 million of the stolen funds were recovered. Investigations indicated that this attack may be related to a North Korean hacking organization.

BitGrail: Involvement of Insiders

The Italian exchange BitGrail has experienced a theft incident involving 120 million euros, with police accusing the founder of possible involvement. Approximately 230,000 users are affected, and the founder faces multiple charges. The court has declared BitGrail bankrupt and has demanded the return of the stolen assets. This case highlights the risks posed by insiders in centralized exchanges.

Poloniex: Two Major Security Incidents

Poloniex has experienced two serious security breaches:

• March 2014: Lost 97 coins, accounting for 12.3% of the holdings at that time.
• November 2023: Suspected North Korean hacker group steals approximately $126 million

The second attack employed complex methods such as social engineering and utilized DEX for money laundering, increasing the difficulty of tracking.

Bitstamp: The system administrator becomes the breakthrough point

In 2015, a Bitstamp system administrator accidentally downloaded a malicious file, leading to a server breach. Hackers successfully stole 18,866 bitcoins, worth approximately $5 million. Afterwards, Bitstamp completely rebuilt its trading platform, implementing security measures such as multi-signature.

A certain exchange: Multi-signature system vulnerability

In August 2016, a well-known exchange suffered a cyber attack. Hackers exploited a vulnerability in the multi-signature system to illegally extract 120,000 Bitcoins. The platform took loss-sharing measures and issued tokens to compensate users.

Coincheck: Improper Management of Hot Wallets

In January 2018, the Japanese exchange Coincheck suffered a theft of $534 million in NEM tokens, becoming the largest exchange hacking incident at the time. The reason was that a large amount of assets were stored in hot wallets and lacked multi-signature protection. The crypto community subsequently took measures to prevent the circulation of the stolen assets.

A Certain Exchange: The Most Influential Hacking Incidents

In 2014, the largest Bitcoin exchange at the time suffered a catastrophic theft, with approximately 850,000 Bitcoins stolen. This incident severely impacted the price of Bitcoin and the trust in the entire Crypto Assets industry.

Security Measures Recommendations

To enhance security, the exchange can take the following measures:

• Cold and hot wallets are separated, with most assets stored offline.
• Implement a multi-signature mechanism
• Strengthen internal controls and audits
• Regularly conduct security assessments and updates
• Enhance employee security awareness training

These events warn us that the security of crypto assets exchanges is crucial. Whether centralized or decentralized platforms, continuous improvement of security measures is necessary to protect user asset safety.