The South Korean crypto exchange platform GDAC faced a hacking attack that led to a loss of about $13 million. On Monday, April 10, the company reported that hackers transferred nearly 23% of its custodial assets from a GDAC hot wallet to an unidentified wallet.
What caused the hack?
Recall that the assets stolen from GDAC were from a hot wallet. A hot wallet is used by crypto exchange platforms like GDAC to store a portion of their funds so they can be accessible for immediate withdrawals and other trading activities.
Unlike cold wallets, hot wallets are always connected to the internet, making them prone to online attacks. This usually results in substantial financial losses for the crypto exchange and its users when there is a compromise.
WEMIX, the native crypto exchange token, was the highest digital asset the attackers got away with. Approximately 10 million WEMIX tokens were stolen along with 61 BTC, 350.5 ETH, and 220,000 USDT stablecoins.
What move did the crypto platform make?
Immediately after the attack, the WEMIX team announced the security breach through its official Twitter handle and assured users it was closely monitoring the situation. The CEO of GDAC also stated that the firm had suspended the firm’s wallet system and blocked all related services.
Furthermore, GDAC notified the Korea Internet and Security Agency (KISA) and the Financial Intelligence Unit and the police of the incident in a bid to recover the funds. The company also requested that other crypto exchange platforms disallow debits from the attacking address. It is working with domestic and foreign issuers to prevent the funds from being laundered.
Looking forward
A South Korean crypto exchange, Bithumb, was hacked in 2018, leading to a loss of about $30 million. This subsequent attack on GDAC reveals the need for tightening security measures across crypto exchanges. Although the lack of a central authority is one of the major selling points of cryptocurrencies, it still opens the industry to many risks.
Thus, the work to make the crypto industry more secure lies with regulators and founders of crypto exchange platforms. Regulations that can curb the use of cryptocurrencies as a means of laundering funds should be established in countries. Thankfully, a form of this can be seen in the alliance of South Korean and Hong Kong regulators to reduce the use of digital assets in illegal foreign transactions.
Founders can also ensure that their crypto exchange platforms have good security to mitigate the risks of online attacks. These platforms can also insure the assets in their care to cover custody risks.
Lastly, users must be careful and carry out the necessary research before trading on a crypto exchange platform. Security measures like two-factor authentication should be utilized to prevent an attack on personal wallets.
Consequently, attacks on crypto exchange platforms can be reduced to the barest minimum.
