Feb 2020 - Altsbit Hot Wallets Hacked

$317 000 USD

FEBRUARY 2020

ITALY

ALTSBIT

DESCRIPTION OF EVENTS

"Your reliable cryptocurrency partner." “Altsbit is a relatively new exchange based in Italy. It was previously known as DigitalPrice but it went through a name change to Altsbit to avoid confusion with a cryptocurrency bearing the same name.”

“Altsbit had only launched as a rebranded service … in October [2019], offering a "roadmap" that comprised a brief list of objectives with "Adding user security functions" coming in last as item number five.” "We have finished rebranding and now we would like to represent you the Roadmap for upcoming 2 months: Trading API, Work processes optimization and fastening, Zendesk update and extended knowledge base content, Deep interface update for Z addresses to eliminate deposits’ delay and to provide 100% processes stability" "We would like to thank @DigitalPriceOrg @KomodoPlatform, @Verus coin, [and] @PirateChain for informational support on rebrand."

"As at press time, Altsbit has a 24-hour trading volume of $14.8 million with 98% of its trading activity coming from the ARRR/BTC pair (ARRR is the native token of the Pirate Chain)." “A review of Altsbit from several weeks ago oddly made note of Altsbit's lax security and low liquidity and volume. In an almost prophetic move the review gave its security aspects an "F" rating.” “We run all the exchange-websites in Mozilla’s Observatory-test. The score in such test is one of many indicators of the exchange’s security. Altsbit received an F-score in this test.”

“Italian cryptocurrency Altsbit had only been around for a few months before it was hacked.” “The exchange operated under its new name Altsbit for only roughly five months until the hack earlier [on February 6th, 2020].” "On February 5, 2020 the exchange Altsbit suffered an attack by hackers[. I]n the attack unfortunately a certain quantity of coins were stolen from the platform."

"Dear users, Unfortunately we have to notify you with the fact that our exchange was hacked during the night and almost all funds from BTC, ETH, ARRR and VRSC were stolen. A small part of the funds are safe on cold wallets." "We are now on analysis of the amount of loss and technical issues of the hack. We will come back soon with more details."

“Initially, the exchange announced the hack stating that almost all funds had been stolen. After some more thorough research, it appears Altsbit only lost under half of the crypto it was storing.” “Approximately $70,000 worth of cryptocurrency was stolen.” "[The c]urrent verified losses are: BTC Lost 6,929 coins out of 14,782 - 7.853 will be returned to users. 53.10% (Refunded), ETH Lost 23,21 out of 32,262 - 9.052 will be returned to users. 28.06% (Refunded), ARRR Lost 3924082 out of 9619754 - 5695672 will be returned to users 59.20% (Refunded), VRSC Lost 414154 out of 852726 - 438572 will be returned to users 51.24% (Refunded), KMD Lost 1066 out of 48015 - 46949 will be returned to users. 97.77% (Refunded)." “The site said users who saw losses must apply for their partial refunds. The bitcoin and ether stolen were valued at around $63,000 at press time.” reported Coindesk initially, later 'correcting' "The bitcoin and ether stolen were valued at around $72.5 million at press time." CoinTelegraph reported Altsbit "losing about $70,000 in a hack" specifying "the hack caused Altsbit to have lost 6.929 Bitcoin, and 23 Ether, among losses in other cryptocurrencies such as Pirate Chain (ARRR), VerusCoin (VRSC) and and Komodo (KMD)." but not bothering to value any of the other coins.

"The refund process will begin 2020.02.09, we are working to complete the system so that it can go as smoothly as possible. Tomorrow we will announce instructions on how to claim your funds and after that the process will start."

"I definitely lost some $BTC on this. I was providing last-resort buy support on a few alts. I guess that's done." "I think I lost some pirate because I was on the fence about keeping it, and just lazily left it on there for a week. Sad day."

“Altsbit has announced that it only has enough funds to issue partial refunds, and that they will be closing their doors in May 2020.” "After a careful analysis we managed to understand the stolen quantities[. F]ortunately a good part of the coins were kept on cold storage[. T]hese coins will be returned to the users of Altsbit exchange[. N]ot having the possibility to [fully] compensate for these losses, [these coins] will be distributed among all users of the platform each coin will have its calculation based on the percentage that was saved during the attack." "User balances were updated in accordance with current situation described above." "After [completing a withdrawal request on the website,] your request will send to our support system and a copy sent to your email. Withdraw will done manually by our technical support specialists."

“Refunds will begin on February 10, 2020 and end on May 8, 2020, after this date it will no longer be possible to request a refund as the Altsbit platform will be terminated.” “We will refund whatever we are holding on cold storage to users and then the platform will close down.” "In terms of refund timing we will try to do as soon as possible at least for those coins that have a higher value, we understand your situation and market fluctuations, the refunds to be made are many and mostly manually so they take longer. We will do our best to complete this step asap." "Refunds will begin on February 10 2020 and end on May 8 2020, after this date it will no longer be possible to request a refund as the Altsbit platform will be terminated."

"In an email to Cointelegraph, an Altsbit spokesperson confirmed that the company’s decision to shut down services is final, noting that the exchange will partly reimburse its customers, stating, “We will refund whatever we are holding on cold storage to users and then the platform will close down.”"

"Please pay close attention to people who pretend to be Altsbit employees, who promise you various things. Be wary of these people. Do not give any information to anyone, just use ticket after creating the form. Altsbit employees will never ask for confidential information. Scammers will promise to repay the lost funds, pay close attention."

"All current users orders on the exchange have been closed, we have updated all users balance to match the correct percentage of coins that will be refunded. These calculations have been completed for BTC/VRSC/ETH/ARRR/KMD."

"Due to the fact that after the attack, the wallet was empty, bona fide users received aborted status for their BTC withdrawals. When calculating the losses and balances of users, this was not taken into account 0,51233823 BTC, 0.21475001 ETH (aborted withdrawals). These transactions will be canceled and added to balances of the owners. The global balance of BTC and Ethereum will be recalculated and accrued to all users of the new account given"

“Hacking group Lulzsec has claimed that they are responsible for the hack, though it is still unclear how they managed to pull it off.” Black-hat hacking group LulzSec appears to have claimed responsibility for the theft on its Twitter feed, saying: "We assure that @altsbit didn't had (sic) proper security to stop Lulz Canon. Many others to follow. Better Stack up the Security - Note to other Exchanges."

Altsbit was a relatively new cryptocurrency exchange based in Italy, which had just recently rebranded and launched a new trading API. On February 5th, 2020, they found that their hot wallets containing the majority of user funds were emptied. Due to their use of commas instead of periods when reporting the totals, clost to half of media sources reported the loss incorrectly as over $70m. Others caught this issue and reported a loss in the range $63k-$70k. Actually this didn't include the losses of the ARRR (Pirate Chain), which were valued at $208,682.68, and VRSC (Verus Coin) valued at $36,147.36. Adding together bitcoin ($66,611.39), ethereum ($4,370.18), komodo/KMD ($761.76) and the above, losses were actually $316,943.37 USD based on close of market price on February 5th, 2020.

The platform distributed the remaining funds ($452,067.03) to affected users proportional to what they held on the platform, and then promptly shut down. There is no indication that any further investigation or recovery was undertaken. News media remains reporting inaccurate figures.

HOW COULD THIS HAVE BEEN PREVENTED?

The primary issue was the large portion of funds left in the exchange's hot wallets. While hot wallets serve to conveniently allow withdrawals, their online status makes them much harder to protect. For example, Altsbit left over 70% of their Ethereum in their hot wallet. A secure exchange would have all customer funds in offline multi-signature wallets and populate hot wallets only with exchange-owned assets.

Check Our Framework For Safe Secure Exchange Platforms

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$317 000 USD

FEBRUARY 2020

ITALY

ALTSBIT

DESCRIPTION OF EVENTS

HOW COULD THIS HAVE BEEN PREVENTED?

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