QUADRIGA INITIATIVE
CRYPTO WATCHDOG & FRAUD RECOVERY PLATFORM
A COMMUNITY-BASED, NOT-FOR-PROFIT
$7 940 000 USD
JANUARY 2022
LIECHTENSTEIN
LCX EXCHANGE
DESCRIPTION OF EVENTS
"Digital Asset Revolution. The Future Will Be Tokenized. LCX is a regulated trading venue offering a range of digital currencies. Join our compliant token sales – get access to new and fast growing tokens first." "Domiciled in Liechtenstein, LCX operates a regulated crypto exchange, a decentralized exchange aggregator, and a token sale platform."
"LCX is a new kind of global financial technology company." "LCX.com is a fintech company that focuses on tokenization of assets, utility and security token offerings and advanced trading tools. LCX, the Liechtenstein Cryptoassets Exchange, is based in Liechtenstein, operates in accordance with the new blockchain laws and has introduced a comprehensive crypto compliance suite."
"The LCX Exchange is a regulated trading venue offering a range of digital currencies. The cryptoassets trading platform has been built from the ground up, leveraging the proficiency of our progressive crypto portfolio desk, LCX Terminal, LCX DeFi Terminal and our sophisticated crypto compliance suite." "LCX, the Liechtenstein Cryptoassets Exchange, is pioneering a blockchain infrastructure bridging the traditional monetary system and the fast-moving trusted technology landscape."
"Since 2013 the founder of LCX, Monty C. M. Metzger, has been evangelizing global leaders about the disruptive impact of blockchain technology and cryptocurrencies. At the same time, his venture capital fund Digital Leaders Ventures was unable to participate and invest – as the regulatory framework and the institutional grade platforms have been missing."
"Frustrated by the lack of solutions for professional investors, the idea of LCX was born. On November 27, 2017 at the heart of #CryptoValley at Zug, Switzerland, Monty wrote the basic idea on this napkin."
"LCX is a member of the World Economic Forum C4IR and had been named Blockchain Pioneer by the Blockchain Research Institute. LCX AG was founded in 2018 with headquarters in Vaduz (Liechtenstein) and branches in Crypto-Valley Zug (Switzerland) and New Delhi (India). In 2020 LCX has gained regulatory approval of 8 registrations in accordance to the blockchain laws by the Financial Market Authority Liechtenstein under Registration Nr. 288159."
"The LCX token is issued by LCX AG in accordance with laws and regulations in Liechtenstein." It's “a long-term sustainable incentive mechanism to motivate various stakeholders to participate in the ecosystem.” "According to assessments by legal firms, the LCX token can be classified as a utility token in the US, Singapore, and Liechtenstein law."
"Crypto exchange LCX has been granted eight out of the 11 crypto-related licenses in Liechtenstein, expanding its security-token services and allowing the company to continue operating in the region. The licenses make LCX a regulated crypto exchange, digital asset custody provider, price oracle provider, digital asset compliance provider, smart-contract creator and token-offering platform, said LCX CEO Monty Metzger."
"LCX AG has suffered a security breach that has seen one of its hot wallets compromised." "At 11:23 PM CET on Jan. 9th 2022, LCX’s Technology team detected unauthorized access of one crypto wallet. A total of approx. 7.94M USD of crypto assets were stolen. 0.7M USD have been frozen," the exchange detailed in a report."
"The transfer occurred at approximately 10 pm UTC on Jan. 8, 2022. The losses, according to Peckshield, total $6.8M. Most of the losses incurred included $3.4M worth of USDC, $2.2M worth of LCX, $504K worth of ETH, $468K worth of SAND, $114K worth of QNK, $47.4K worth of LINK, $10.8K worth of ENJ, and $9.7K worth of MKR."
"Service Notice: We noticed a security incidence at our platform. We are currently investigating and will provide regular updates. User funds are safe! In the meantime deposits and withdrawals have been suspended."
"Liechtenstein-based crypto exchange LCX has confirmed the compromise of one of its hot wallets after temporarily suspending all deposits and withdrawals on the platform." "We are sorry to announce that one of our hot wallets had been compromised. We have taken security measures to protect other wallets and assets."
"They made the announcement on Twitter and have assured customers that they have taken security measures to protect other wallets and assets. Deposits and withdrawals are currently suspended. Ethereum tokens such as ETH, USDC, EURe, the native LCX token, and others have been transferred to the hacker ETH wallet"
"On the day of the attack, we identified the attack vector used to gain unauthorized access to only one of our hot wallets. Our tech team was able to take actions immediately to secure our platform and additional assets. The early incident analysis shows that our cyber security efforts are well structured and secure. Our main server infrastructure, data storages, wallet management and vaults have not been accessed and have not been compromised. The investigation and the identification of the responsible parties is ongoing. We also have identified additional wallet addresses used by the unauthorized party. However, we have been advised to not publicly disclose the ongoing tracking activities at this point in time."
"In partnership with financial technology company Monerium, LCX froze (disabled for onchain movement) around 611,000 stolen EURe tokens (worth around USD 692,000)."
"By 11:12 pm GMT, the hackers swiftly moved converted ETH to Tornado.Cash, a mixing service often used to anonymize stolen assets on the Ethereum blockchain. Interestingly, the hackers used the 100, 10, and 1 ETH contracts on Tornado, a move that was not necessarily required arithmetically. In total, the operation from theft to deposit at Tornado was complete within 1.5 hours of the initial hack, earning the hackers roughly $5.33 million per hour."
"The LCX token has been down 9.8% in the last 24 hours."
"LCX has not yet revealed any possible solution to help return the stolen funds. The exchange has only mentioned its security measures to secure other wallets and assets." The exchange has not yet disclosed plans for any kind of reimbursement, but insisted that it would "do everything in its power to mitigate the impact from this incident and restore full service as soon as possible." "It has also halted deposit and withdrawal functionalities."
"We are happy to announce that all deposit and withdrawal services have resumed 100% operations. Also deposit and withdrawal services of EUR in collaboration with Monerium have resumed."
“During this difficult period, we greatly appreciate the support from our customers, other exchanges, security experts, and the broader crypto community.”
LCX Exchange is a centralized cryptocurrency exchange based in Liechtenstein. In an incident which they have kept undisclosed, their hot wallets were breached and significant funds were taken. While EURe stablecoins were recovered, most funds were cashed out through TornadoCash. While withdrawals have been enabled again on the platform, it's unclear if the lost funds have been restored.
HOW COULD THIS HAVE BEEN PREVENTED?
Hot wallet security setups should be reviewed by at least 2 security experts prior to launch. In general, however, due to the nature of the wallet, hacks should be prepared for through self insurance or an industry insurance fund.
Rekt - LCX - REKT (Feb 8)
LCX – Buy, Sell & Trade Cryptocurrency at LCX's Regulated Exchange (Feb 16)
About LCX | Liechtenstein Cryptoassets Exchange (Feb 17)
LCX loses $6.8M in a hot wallet compromise over Ethereum blockchain (Feb 17)
@peckshield Twitter (Feb 17)
@lcx Twitter (Feb 17)
https://beincrypto.com/lcx-exchange-hacked-6-8m-transferred-to-hackers-wallet/ (Feb 17)
https://etherscan.io/address/0x165402279f2c081c54b00f0e08812F3fd4560a05 (Feb 17)
https://www.crunchbase.com/organization/lcx (Feb 17)
LCX Exchange Gets Licensed in Liechtenstein to Help Banks Create Their Own Digital Assets - CoinDesk (Feb 17)
LCX Loses USD 8M in a Hot Wallet Hack (Feb 17)
LCX Exchange Loses $6.8M in Hot Wallet to Hackers Amid BTC Crash - CoinQuora (Feb 17)
@lcx Twitter (Feb 17)
@peckshield Twitter (Feb 17)
Hot Wallet Incident Report - LCX (Feb 17)
Exploit radar: LCX Hot Wallet Hack | TRM Insights (Feb 17)
