WAZIRX

DESCRIPTION OF EVENTS

"We keep your digital assets safe with an extra layer of security." "Double your WazirX account security with 2-factor authentication - choose the setup that suits you best." "We use advanced encryption and follow the highest industry standards, ensuring worry-free crypto trading and investment for you." "We don't just talk, we practice it. Explore our transparency reports, proof of reserves, and more, because informed users make better decisions."

"Begin your WazirX journey with a quick signup and smooth KYC verification process."

"Minutes before the hack, a legitimate USDT transfer failed, a red flag that went unnoticed.

Two of the four signatures were actually for upgrading the safe to the malicious contract, not for the USDT transfer."

"With all pieces in place, the hackers executed their exploit.

Using the two compromised keys and the two phished signatures, they successfully upgraded the multisig to their malicious contract.

Critically, one of the phished signatures came from Liminal Custody, the co-signer responsible for final checks.

This suggests a significant failure in Liminal's verification process, a vulnerability the attackers exploited to devastating effect.

With the upgrade complete, the attackers gained full control of the wallet, allowing them to drain funds at will."

"According to the details shared by WazirX, the hackers managed to access these signatures, allowing them to authorize transactions and transfer the digital assets from the wallet. The exact method used by the attackers to obtain these signatures has not been disclosed, but several potential vectors could have been exploited: 1. Compromise of Private Keys: If the private keys of the signatories were somehow compromised, the attackers could have generated the necessary signatures themselves. 2. Insider Threat: An insider with access to the private keys or the signing process could have played a role in the breach. 3. Security Vulnerabilities: There may have been vulnerabilities in the systems or processes used to manage the private keys and generate signatures. Despite the robust nature of the multisig setup, the attack highlights the vulnerability of digital signatures and private keys. Even with multiple layers of security, a successful attack on the key management system can lead to a significant breach."

"The compromised wallet was a Safe (formerly known as Gnosis Safe) multi-signature wallet using a 4-of-6 signature scheme. Five keys were held by WazirX in hardware wallets, while the sixth was an HSM key from Liminal Custody. This HSM key operates based on authorizations from WazirX’s platform and serves as the final line of defense, validating the authenticity of transactions before signing them.

Under standard procedures, WazirX initiates a transaction through the Liminal Custody platform, where the destination wallet address must be pre-whitelisted. Three of WazirX’s five signers then confirm the transaction’s accuracy and sign it using their hardware wallets. Once Liminal Custody receives three valid signatures, it adds the final signature and submits the transaction to the blockchain.

Analysis of on-chain data shows that the attackers managed to acquire three valid signatures, with the fourth signature provided by the transaction initiator, Liminal Custody.

Here’s how the attack unfolded:

Transaction initiation: The three WazirX signers accessed the Liminal Custody platform via a bookmarked link or Chrome shortcut app and completed multi-factor authentication. They saw pending transactions for two GALA transfers and one USDT transfer, and signed these transactions using their hardware wallets. However, the signed transactions were actually for a smart contract upgrade rather than the expected token transfers. Due to this data mismatch, Liminal Custody rejected all three transactions.

Malicious Upgrade: The attackers obtained signatures from three WazirX signers by forging transactions and then submitted the malicious upgrade transaction to Liminal Custody, accompanied by three legitimate signatures.

Final Approval: Liminal Custody provided the final signature, and once the transaction was confirmed on the blockchain, the smart contract was upgraded. This allowed the attackers to illegally transfer funds to their own wallets."

"We're aware that one of our multisig wallets has experienced a security breach. Our team is actively investigating the incident. To ensure the safety of your assets, INR and crypto withdrawals will be temporarily paused. Thank you for your patience and understanding. We'll keep you posted with further updates."

"According to WazirX, despite searching for evidence that their own devices were compromised, the team’s investigators “have been unable to find any evidence that WazirX signers’ machines were compromised.” Instead, they found that the attack “involved the flow of transactions through Liminal infrastructure, as evidenced by the use of 3 WazirX signatures and 1 Liminal signature.”

The Liminal MPC wallet was supposed to prevent any withdrawals from being sent to non-whitelisted addresses. But it failed to do so, WazirX claimed.

In addition, the malicious transaction “upgraded the [multisig wallet] contract to transfer the control to the attacker,” which Liminal’s interface is not supposed to allow.

The report claims that India’s Central Bureau of Investigation (CBI) is a client of Liminal, as it uses the service to store assets seized during investigations. It suggests that the agency may not have used Liminal as a trusted custodian if it had known the wallet contract could be upgraded through Liminal’s interface."

"@ZachXBT submitted definitive evidence of a KYC-linked deposit address used by the exploiter to receive funds from the WazirX exploit. This fulfills one of the criteria of the bounty - ‘Identifying a KYC centralized exchange deposit’."

"This $235 million heist not only shakes user confidence but also raises questions about the efficacy of current custody solutions and multisig implementations.

In a world where even the most robust security measures can be bypassed, is entrusting large sums to any single entity, no matter how reputable, a risk worth taking?

The rise of sophisticated, possibly state-sponsored attacks adds a chilling new dimension to an already treacherous landscape.

With data breaches becoming the norm, the rise of phishing attacks and compromised private keys and multisig a rising concern lately."

"WazirX officially announced on Aug. 8 that the platform will undo all trades carried out after the withdrawal suspension on July 18.

“All users will have their portfolio balances on the WazirX platform restored to what they were on July 18, 2024,” the announcement said, adding that the account recovery will be conducted over the next few days. Affected users will receive an email notification on the affected trades."

WazirX is one of the largest cryptocurrency exchanges in India. Their multi-signature wallet for all ethereum and ethereum-based tokens was a smart contract which was able to be upgraded with just 4 signatures. A third party entity managed to trick the WazirX team into signing the upgrade transactions on three separate occasions. Once the upgrade transactions were combined together, the resulting transaction was passed to custodian Liminal, who appears to have approved it. With the wallet upgraded, the attacker was able to take all of the assets. Assets appear to still be at large, and the WazirX platform appears unable to make users whole at present.

Rekt - WazirX - Rekt (Aug 8)
@Mudit__Gupta Twitter (Aug 8)
Ethereum Transaction Hash (Txhash) Details | Etherscan  (Aug 8)
@Mudit__Gupta Twitter (Aug 8)
WazirX 2 | Address 0x27fd43babfbe83a81d14665b1a6fb8030a60c9b4 | Etherscan  (Aug 8)
@ArkhamIntel Twitter (Aug 8)
Arkham (Aug 8)
https://cointelegraph.com/news/wazirx-undo-trades-withdrawal-halt (Aug 8)
https://cointelegraph.com/news/wazir-x-finds-no-evidence-compromised-devices-preliminary-investigation (Aug 8)
https://cointelegraph.com/news/microsoft-windows-data-blackout-downs-major-financial-firms-airlines (Aug 8)
https://frontline.thehindu.com/economy/wazir-x-crypto-currency-finance-minister-nirmala-sitharaman-central-bank-trading/article68497082.ece (Aug 8)
@NischalShetty Twitter (Aug 8)
@WazirXIndia Twitter (Aug 8)
@WazirXIndia Twitter (Aug 8)
@WazirXIndia Twitter (Aug 8)
The Great Digital Heist: How Hackers Exploited WazirX's Digital Signatures - Magicnation Forum (Aug 8)
WazirX Hacking Incident Analysis By Cobo Security Team (Aug 8)
WazirX Cyber Attack: Key Insights and Learnings - WazirX Blog (Aug 8)
Update on WazirX Incident - Liminal Custody (Aug 8)
@NischalShetty Twitter (Aug 8)
Ethereum Transaction Hash (Txhash) Details | Etherscan  (Aug 8)
Buy Bitcoin, Cryptocurrency at India’s Largest Exchange | Trading Platform | WazirX (Aug 8)

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