$16 396 000 USD

AUGUST 2020

GLOBAL

ELECTRUM

DESCRIPTION OF EVENTS

"Securing Bitcoin payments since 2011, Electrum is one of the most popular Bitcoin wallets. Electrum is fast, secure and easy to use. It suits the needs of a wide spectrum of users." "Electrum verifies that your transactions are in the Bitcoin blockchain. Because Bitcoin is not about trust, It is about freedom and independence." "Sign transactions from a computer that is always offline. Broadcast them from a machine that does not have your keys" "Be safe from malware. Use two-factor authentication by Electrum and Trustedcoin."

 

"Electrum is free software. Released under the MIT License. Anyone can run an Electrum server. No single entity controls the network." "Electrum has various user interfaces. It can be used on mobile, desktop or with the command line interface." "Electrum supports hardware wallets: Ledger, Trezor, Keepkey" "Split the permission to spend your bitcoins between several wallets."

 

"Electrum is a light client, which means it must connect to the blockchain through a server, which by default is chosen from a list of public Electrum servers. Anyone can operate such a public server and some users will be randomly connected to it."

 

"When broadcasting a transaction on Electrum, it gets sent to the Electrum Server you are connected to for propagation to the network. The server should try to add the transaction to its mempool and further propagate it to other Bitcoin nodes."

 

"In case the transaction is invalid, the Electrum Server the user is connected to can return an error message, which will be displayed an error popup on the user's Electrum client." "Prior to Electrum v3.3.3, the error message returned was allowed to be free text, so the Electrum Server could return any message it wants and make it pop up on the user's client as an error message."

 

"Now the attackers here exploited this free-text capability, along with the fact that anyone can run an Electrum server to which clients will be automatically connected." "The attackers then have set up a public Electrum Server, which was tweaked so that instead of propagating the user's transaction as it should, it always returns a malicious error message directing the Electrum clients to a phishing website to "upgrade" their Electrum version."

 

"So when users of Electrum got randomly connected to such a malicious server, they were given the malicious error message directing to the malware download site. Since it looks just like any valid error message within the app, it was easier for the attackers to fool the users."

 

"This did not affect users who were only connected to their own Electrum Server, since the problem is the error returned from an untrusted server. It is always best to use your own node, and when using Electrum, run and connect directly to your self-operated Electrum Server."

 

"I am in a western country however wish not to say in this open forum." "I had 1,400 BTC in a wallet that I had not accessed since 2017. I foolishly installed the old version of the electrum wallet. My coins propagated. I attempted to transfer about 1 BTC however was unable to proceed. A pop-up displayed stating I was required to update my security prior to being able to transfer funds." "The 1,400 was the vast vast majority of my holdings."

 

"I installed the update which immediately triggered the transfer of my entire balance to a scammers address."

 

"Electrum doesn't have a bug that can be exploited, it cannot be controlled remotely, it has no open vulnerability that can cause loss without user's action. Electrum was no more "hacked" or "exploited" than gmail, yahoo, outlook and all financial institutions (banks, etc.) as well as various other online services are every day."

 

"Because of how peer discovery works in Electrum, there is not much we can do for old versions, since we can't prevent them with 100% success rate to run into a malicious server. This is because, unlike other lightweight wallets, Electrum decided to not have only few harcoded servers that will be responsible for the privacy of all users, and act as single point of failure, but instead allow users to run their own servers or use servers that they trust. Electrum takes user privacy very seriously, which is why proper peer to peer discovery without central authority arbitration was adopted, instead of anything else. This way an attacker cannot keep an Electrum user offline, or isolate him, or pull various attacks."

 

"After all, when you install and use security software and finances software such as Electrum the first rule is to make sure you are running a version that has no discovered vulnerabilities and your build is signed and genuine." "It is very clear that since the security updates provided by Electrum hadn’t been installed, their wallet was already compromised. Consequently, the prompt to update and the actual “update” (aka, malware) was from the hacker."

 

"I know this is not pleasant to read after loss of funds, and we are sorry, but this is the sad truth. This is not a vulnerability in Electrum, so we are going to respectfully close such issues / tickets on github because we are already doing everything possible to limit the effects of phishing attacks, and such issues do not provide any new information."

 

"This also did not affect users who properly validate their downloaded software and its download source, as well as users who do not store coins on a hot wallet (and properly verify addresses on the HWW device)." "Electrum developer Thomas Voegtlin urged all users to update their software. He said."

 

“Electrum wallet users need to update the software to the latest version (3.3.4) from the official repository and be particularly careful with update or other warning messages that could be disguised phishing attempts.”

 

"Then import your seed, and sweep the BCH/BSV somewhere else and dump them for BTC to reclaim some value. The value of your fork coins are currently worth just over $500k."

 

"I can't comment on the code quality of those Electrum forks but I had a quick look and they appear to be genuine. I'd say it's worth the risk considering the situation."

 

"Hi, what value is reporting it to police? Is there a global online system where one can report such losses?" "I have contacted coinfirm to date and am waiting for them to get back to me."

 

"I am preserving my energy for the day that I locate the team that scammed me. They have begun moving my coins around. The battle has just begun."

 

"The person who took coins from this address has put them into 5 separate addresses, as of now they still have bitcoin in them." "As of yesterday..Out of what i read.. Binance and other exchanges are now Black listing the TxId, and address that touch them. Nothing much more to do about this tragic story."

Electrum is one of the most popular wallet softwares available for storing and transacting with bitcoins online. Scammers would run nodes that return an error requesting the user to update their nodes when a transaction broadcast is requested. The upgrade software provided is malicious and steals the user's funds. A user with around 1,400 bitcoin which they hadn't used since 2017 became a victim of this attack and ended up losing their funds. While the wallets were blacklisted, there is no indication of whether the funds were ever recovered.

HOW COULD THIS HAVE BEEN PREVENTED?

Always download software from the official website. Test wallet software on a smaller balance before making any transactions. Store the majority of funds fully offline, ideally with a hardware wallet.

 

Check Our Framework For Safe Secure Exchange Platforms

Sources And Further Reading

 For questions or enquiries, email info@quadrigainitiative.com.

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