PayFair P2P Exchange Hacked

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Payfair P2P Exchange

Ethereum is tricky to set up as a proper multi-signature wallet, since the functionality is not built-in and must instead be done through a smart contract. Smart contracts often have exploitable vulnerabilities. But more importantly, it does not make sense to trust an unknown entity in an unidentified country with your funds, regardless of whether the exchange claims to be “P2P” or not. The same issues with centralized exchanges apply to any escrow service as well.

The country for this case study is not yet known.

About Payfair P2P Exchange

“On October 2, PayFair—a decentralized escrow and P2P exchange—closed its website because one of its main cold wallets was emptied, leading many to speculate about a possible exit scam. On September 29, Payfair disclosed on its Telegram channel that the private key to one of its cold wallets was compromised, which led to a hack. Their team says it is still unsure of how the private key was compromised but is conducting an internal investigation into the matter. While user funds have since been transferred to backup wallets, part of the ETH that was stolen has not been recovered. Despite announcing that the platform would only be down “until the end of the week,” the PayFair.io website still appears to be down and they have not updated their social media since July 29.”

The country for this case study is not yet known.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - PayFair P2P Exchange Hacked

Date	Event	Description
October 1st, 2019 12:01:29 AM MDT	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost is unknown.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

Let this be a reminder that claiming to be "decentralized" doesn't always mean that there is no custody of any funds. The proper storage of funds offline in a multi-signature wallet with keys held by multiple reputable people has never been breached.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.