$50 Million Ethereum Theft at Upbit

A massive theft has occurred at South Korean cryptocurrency exchange Upbit. With 342,000 Ether missing from their hot wallet, that amounts to a $50 million theft at the time of publication. Upbit has apologized to their customers for the inconvenience and will be suspending both deposits and withdrawals for the next weeks while they figure out the source of the problem and ensure the hole is plugged. 

The exchange is run by Kakao, a Korean tech behemoth and a statement on November 27th confirmed the theft: 

“At 1:06 PM on November 27, 2019, 342,000 ETH (approximately 58 billion won) were transferred from the Upbeat Ethereum Hot Wallet to an unknown wallet. Unknown wallet address is 0xa09871AEadF4994Ca12f5c0b6056BBd1d343c029.”

There is a somewhat comical nature to cryptocurrency thefts because the victim can know exactly where the cryptocurrency is, but not be able to do anything about it. Albeit, this inability to seize assets is another reason that cryptocurrency has such strong support with libertarian types. 

Upbit’s Reaction

The CEO has said that the entire theft will be covered using corporate assets and they have already moved the crypto assets they previously held in hot wallets into cold wallets. This is a show of good faith that will hopefully restore some faith in cryptocurrency markets. Crypto deposits are obviously not insured in the same way that fiat deposits are in regular banks, so many times, it falls to the exchange to make their customers whole. 

The result of the hack in the cryptocurrency markets was a drop in the price of Bitcoin below $7,000. We have been in a rough market dynamic recently and this inspired extra trust issues in cryptocurrency. An interesting note about these price dynamics is that altcoins didn’t react much at all. Ethereum’s price stayed nearly flat in the aftermath, which indicates that many traders take the overall market sentiment and then execute using Bitcoin

A Potential Inside Job

One theory that CoinTelegraph has put forward is that this was an inside job. There are two pieces of information that corroborate this idea. First, the CEO has refrained from calling it a “hack”, which could be a way of avoiding admission of a security breach, or it could be a silent way of saying that there’s more than a simple hack occurring here. 

Second, @whale_alert tweeted about several large transactions to unknown wallets by Upbit. The exchange claims these were legitimate transactions and that they were moving Tron and BitTorrent tokens to their cold wallets. Assuming this is true, it could be possible that someone knew of these transfers and was able to time the Ethereum crypto transfer so it blended in more.