Cyberconnect Discord Channel Hacked

Notice: This page is a freshly imported case study from the original repository. The original content was in a different format, and may not have relevant information for all sections. Please help restructure the content by moving information from the 'About' and 'General Prevention' sections to other sections, and add any missing information or sources you can find. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Cyberconnect

CyberConnect is developing a decentralized social media platform. As a promotion at the end of 2021, they launched an NFT with free minting. Their Discord sever was set up using MEE6, a widely implemented Discord bot which assists with ranking and moderation functions. MEE6 had administrative level access to a wide range of Discord servers where it was set up. One of the MEE6 employee accounts was compromised, and the attackers used that to run widespread phishing attacks on multiple NFT communities, including CyberConnect. CyberConnect had previously announced an NFT with free minting, and the NFT space often has a wide range of time-sensitive opportunities. It's unclear exactly how many users were affected, however there are at least 3 reports visible on Twitter. MEE6 has apparently not published further details about what happened, however CyberConnect has provided a detailed document reporting their understanding of the situation. CyberConnect has also started collecting information on affected users, which they were claiming was to be used for "restitution", however no further update appears on their Twitter or Mirror announcing any further plan.

About Cyberconnect

Homepage:

Cyberconnect Landing Page:

OpenSea Homepage:

Cyberconnect NFT Statistics:

Cyberconnect dev center:

"CyberConnect is a decentralized social graph protocol that helps Web3 applications bootstrap network effects. It empowers users to truly own their social identities, contents, and connections in a social network and provides developers with a rich set of tools to build applications with meaningful social experiences." "One of the promises made by web3 entrepreneurs is putting data back in the hands of owners through decentralization. Palo Alto-based CyberConnect is among a handful of blockchain startups working to fulfill this vision."

“In web2, companies with the largest social network own users’ social graphs and build walls around them to stem competition and advance corporate interests,” says CyberConnect CEO and co-founder Wilson Wei.

"As such, Wei and his team are building a social graph “protocol,” the underlying rules that allow data to be shared between computers, for applications, and in web3’s case, without a centralized agent like Facebook. The end goal is that users can travel across web3 platforms with their followings and followers."

"Developers can build social dApp with CyberConnect protocol to store and manage users’ social data such as profiles, posts, and content in a decentralized manner. Also, users can publish their data in NFT format on a chosen blockchain for monetization purposes. For example, the content creator can publish 100 editions for their blog with a price of 14 $CYBER tokens per edition and only allow their subscriber to collect such content NFT."

"Utilizing airdrops and tokens to attract early adopters, convert them to contributors and retain them through rewards like badges is a popular and proven practice among top Web3 projects. The protocol enables communities to build large audiences with social data that lives on CyberConnect as ERC-721 NFTs. Community tooling applications use CyberConnect to power community profiles and reward members to participate in activities with badges issued through the protocol."

"Developers can utilize CyberConnect to get interesting recommendation data when they build their social dApp. For example, the protocol can generate a list of recommended people to follow based on users’ relationships and social data from both off-chain and on-chain sources. Also, a list of recommended tokens to purchase can be generated based on modeling trading behavior & holdings relative to other addresses (i.e. collaborative filtering model)."

"An app experience powered by CyberConnect will look like this: Users connect their crypto wallet — which has become a universal gateway to any web3 app — to a social platform, upon which they will be shown all their existing connections. They will get recommended user addresses to follow, which is based on CyberConnect’s indexing. Once they follow someone, that piece of information will be added to CyberConnect’s network and become “portable and self-sovereign.”"

"Probably Nothing... Buckle up and get ready for this gorgeous NFT! More details coming in a bit." "What a year! frens Now looking back, we just feel so grateful for everyone coming along. Join us to unwrap #My2021Web3Journey and take a moment to thank all your favorite projects. Get your unique NFT to mint this remarkable year of yours in time." "The “Verified Web3 Dwellers” NFT is finally here to reward participants of #LetsCyberConnect. Shout-out to @ProjectGalaxyHQ and @0xPolygon for making this happen. What's even better? We're covering the minting costs."

The “Verified Web3 Dwellers” NFT is finally here to reward participants of #LetsCyberConnect.

Shout-out to @ProjectGalaxyHQ and @0xPolygon for making this happen.

What's even better? We're covering the minting costs.

About MEE6

Homepage:

"MEE6 is a 2-year-old Discord bot known for Levels, Auto-moderation, and its' paid music/record features. We also offer Reddit/Twitch/YouTube notifications, timers, custom commands, and other moderation features." "The best Discord Bot for your server." "Configure moderation, leveling, Twitch alerts, and much more with the most easy-to-use dashboard!" "Take advantage of the welcome message to inform newcomers about your server rules, topic, or ongoing events. You can design your own welcome card or keep it simple."

"MEE6 gives you full control to create the command of your dreams! Create commands that automatically give and remove roles and send messages in the current channels or in user's DM." "Notify your server when you or your favorite content creators begin to stream, upload, and post content." "MEE6, the Discord Bot trusted by 19+ million servers." As of April 2022, "Mekaverse, Doodles, CyberKongz, VeeFriends, CoolCats, and RTFKT all use MEE6 everyday to manage their Discord server. More than 60,000 NFT & crypto Discord servers setup MEE6 every month, and that number is growing fast."

This is a global/international case not involving a specific country.

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.

A significant number of vulnerabilities exist in the Discord messaging application. (TBD expand.)

"We also have reason to believe that one of our server admins had their account previously compromised. This may have been a contributing factor to what happened in the CyberConnect server."

"In this particular case, one of our server admins was approached by a bad actor disguised as a community member with a partnership offer and asked to join the team’s server to discuss further. Upon joining the server, the admin was presented with a fake verification bot. By interacting with the fake bot, the admin’s Discord token was stolen. This enabled the hackers to bypass the admin’s password and 2FA helping them gain control of the account. This is possible due to Discord’s unsafe practice of storing user tokens in the local storage."

"Such cases of deception are growing at a rapid pace. You can read more about how social engineering is being used in a malicious manner and how to protect yourself."

Past social engineering vulnerability case by fccview:

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.

"On May 18th, 2022 at approximately 01:32 AM UTC the CyberConnect Discord server was compromised, along with a number of other popular Web3 servers including Axie Infinity, Moonbirds, and RTFKT. The hack occurred as a result of the popular Discord moderation bot called MEE6 being compromised. After taking control of the CyberConnect moderation bot, bad actors posted a phishing link encouraging community members to claim an airdrop."

"It has been determined that a MEE6 employee’s account was compromised, allowing a group of bad actors to target prominent Discord servers such as CyberConnect. They were able to achieve this by manipulating the MEE6 bot to create a server admin reaction role, which would then be used to grant admin access to the hacker’s account. After this, they set up a new bot that posted the phishing link and kicked all mods from the server."

"Community members who clicked that link, approved the contract, and attempted to claim token airdrop, unknowingly gave the hackers control of their wallets leading to, in many cases, a loss of funds and NFTs. While our team was able to take back control of the server within 14 minutes, a number of community members had already been affected."

Key Event Timeline - Cyberconnect Discord Channel Hacked

Date	Event	Description
December 17th, 2021 12:54:00 AM MST	Probably No Promotion	"Probably Nothing... Buckle up and get ready for this gorgeous NFT! More details coming in a bit".
December 17th, 2021 2:50:00 AM MST	Free Minting Promotion	CyberConnect launches a promotion for free minting of a "Verified NFT Dwellers" NFT to reward participants, and they are apparently covering all the minting fees as well for participants.
December 31st, 2021 8:12:00 PM MST	End of Year Minting Commemoration	CyberConnect promotes another NFT mint on Twitter to commemorate the end of the year.
March 28th, 2022 5:31:00 PM MDT	FCCView Breaks Down Social Engineering	Twitter user "fccview" describes a social engineering attack method which was used against developers of another protocol. TBD more details, try to find relevance.
April 11th, 2022 3:06:00 AM MDT	MEE6 NFT Bullishness	Twitter user eggbomb.eth posts that he's bullish about the MEE6 NFT because "projects like CyberKongz, Doodles, Cool Cats, Veefriends, RTFKT and many more are using MEE6 Bot within their server".
April 12th, 2022 4:41:00 PM MDT	Not Enough To Convince You	NFT collector mekamran promotes the MEE6 NFT collection and at the same time the service. He posts that "Mekaverse, Doodles, CyberKongz, VeeFriends, CoolCats, and RTFKT all use MEE6 everyday to manage their Discord server. More than 60,000 NFT & crypto Discord servers setup MEE6 every month, and that number is growing fast"
May 3rd, 2022 3:13:00 PM MDT	WEB3 Task Page Free NFT	CyberConnect launches a WEB3 task page, in partnership with DappBack, which allows users to earn a free "Level 1 CyberConnect NFT" for completion.
May 17th, 2022 7:32:00 PM MDT	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.
May 17th, 2022 8:10:00 PM MDT	Tricky NFTs Warning
May 17th, 2022 8:14:00 PM MDT	CyberConnect Team Issues Warning	The CyberConnect team issued a warning on Twitter. "HEADS UP PLEASE, DON'T CLICK ON ANY LINK! WE WILL NEVER ASK FOR YOUR PRIVATE KEY ON DISCORD! Our team is working to solve the situation with the bot's security in our server!".
May 17th, 2022 8:17:00 PM MDT	PeckShield Alert Tweet	PeckShield posts an alert tweet to warn the NFT community of the attack, referencing accounts for NFT projects CyberConnect, RTFKT, Moonbirds, and Memeland.
May 17th, 2022 8:55:00 PM MDT	NFTherder Announces Breach	NFTherder announces a breach on Twitter, and notes that "PXN, RTKFT, [and] Moonbirds discord admin accounts [were] compromised" and "MEE6 was not hacked. Admins in the servers where compromised." He warns users to "not click any fake mints".
May 17th, 2022 10:02:00 PM MDT	Jake H/777Skits Twitter Analysis	Jake H (777Skits) publishes a detailed thread explaining what he calls the "New Account Hacking Method". They outlined how administrators of projects would be approached with collaboration offers, and fake verification bots would be used to gain credentials to the Discord account of the administrator, which could then be used through webhooks to post the messages.
May 17th, 2022 10:58:30 PM MDT	CyberConnect Raises $15M In Series A	CyberConnect reportedly completes their funding round with financing totaling $15m USD according to TechCrunch. “In web2, companies with the largest social network own users’ social graphs and build walls around them to stem competition and advance corporate interests,” says CyberConnect CEO and co-founder Wilson Wei.
May 18th, 2022 12:45:00 AM MDT	Beosin Alert Tweet	Beosin provided an alert about the MEE6 bot being compromised and listed the affected projects as @mypethooligan, @TheApiens, @CyberConnectHQ, @proof_xyz, @RTFKT, @Moonbirds, @memeland, and @AxieInfinity.
May 18th, 2022 3:50:10 AM MDT	Vauld Insights Article	Vauld Insights publishes an article on the situation. They cover over the attack and note that "Memeland, RTFKT, CLONEX, PXN, and Moonbird were compromised along with the NFT video game Axie Infinity". According to the article, MEE6 was denying the hacking claim at this time.
May 18th, 2022 5:50:00 AM MDT	InterlockWeb3 Event Summary Published	InterlockWeb3 publishes an analysis/summary of the events which have happened so far. Several Discord servers, including popular ones like Axie Infinity, have been targeted in recent hacks involving the MEE6 bot and compromised admin accounts. The attackers not only posted malicious links but also used a new method to gain control of admin accounts. By creating a reaction role feature from MEE6, they could grant alternate accounts admin privileges and send webhook messages while concealing the compromised admin's identity. Interacting with these fake bots allowed the hackers to acquire users' Discord tokens, granting them immediate access to accounts without requiring 2FA or passwords. To prevent falling victim to such attacks, it is advised to always verify the legitimacy of communication, double-check if the bot is genuine, and consider using auto-roles for verification. The list of affected servers includes various communities with a total of 2,765,000 users, highlighting the need for enhanced security measures in the Web3 space.
May 18th, 2022 6:23:00 AM MDT	MEE6 Twitter Acknowledgement	The MEE6 Twitter account publicly acknowledges the attack. They report it was due to one of their employee's accounts getting compromised, and they've taken "all the steps" to make sure it never happens again.
May 18th, 2022 8:32:03 AM MDT	Vice News Reports Compromise	Vice News reports that hackers have targeted the Discord servers of multiple popular NFT projects, using a compromised Discord bot to deceive users into clicking on malicious links or purchasing fake NFTs. The affected projects include Memeland, PROOF/Moonbirds, RTFKT, and CyberConnect. Memeland issued warnings to users, advising them not to click on any links and emphasizing the importance of verifying information. Alien Frens also confirmed the hack and expressed uncertainty about the method of infiltration. The Discord bot mee6, used by over 16 million servers, was allegedly taken over by hackers, leading to unwanted messages being posted. Axie Infinity, APIENS, Cool Cats, and Burrito Boyz were among the other victims. Bots within Discord are attractive targets for hackers as they provide a means to send seemingly official messages. The compromised bot poses a significant security risk for crypto projects and their users, allowing hackers to conduct phishing attacks on a large scale.
May 18th, 2022 9:37:00 AM MDT	Idea For Reimbursement Floated	NFTHerder floats the idea that the MEE6 bot developers should reimburse those users who were affected by the loss. "MEE6's employee account was breached & scammers used that account to execute the scams and steal eth. MEE6 support denied it for hours yesterday"
May 18th, 2022 10:12:00 PM MDT	NFTherder Request For Reimbursement	NFTherder requests reimbursement from MEE6 on Twitter, warning that they'll "lose all credibility in the nft space" if they don't.
May 19th, 2022 2:31:30 PM MDT	CyberConnect Publishes Investigation	CyberConnect makes an announcement on Twitter and publishes an investigation on the Notion platform. They are working on a restitution plan for those affected and implementing more security measures into their protocol.
May 19th, 2022 3:13:20 PM MDT	VPNOverview Article Published	VPNOverview publishes an article about the NFT channels being exploited.
May 23rd, 2022 8:00:00 AM MDT	CPO Magazine Article Published	CPO Magazine publishes an article on the exploits.
May 30th, 2022 10:12:00 AM MDT	NFTHerder Publishes Discord Hack List	This incident is included in a list of Discord hacks published by NFTHerder.
May 31st, 2022 11:08:16 AM MDT	NFTEvening Negligence Article	The NFTEvening news site publishes an article originally titled "NFT Twitter Accuses Discord Bot MEE6 of Negligence" and later retitled "MEE6 Discord Bot Accused of Negligence". TBD read more detail.
May 31st, 2022 11:15:22 AM MDT	Business News Article	The online Business News site publishes an article about the situation.
June 7th, 2022 6:41:00 AM MDT	NFTherder Again Requests Reimbursement	NFTherder again publicly requests reimbursement and acknowledgement from the MEE6 team, in response to the launch of their NFT project.
June 8th, 2022 3:53:00 AM MDT	NFTherder Public Criticism	NFTherder posts at "3 weeks" later that it's "[t]ime to stop using MEE6" because there are "[n]o official report or refunds" and shares the NFTEvening article.
June 8th, 2022 5:41:00 AM MDT	NFTherder Reaching Out To Other Servers	NFTherder reaches out to affected servers and confirms that "MEE6 hasn't shared a detailed report or offered reimbursements of misappropriated nfts/eth".
June 9th, 2022 6:06:00 PM MDT	NFTherder Stops Using MEE6 Bot	NFTherder posts on Twitter that they will "stop using MEE6 on all future servers", citing "no intention to refund", "they won't release a public statement", and "employees can still remote access any server". He expands that "[right now] anything is preferred over mee6".

Technical Details

Explanation of Attack By 777Skits

777Skits published a tweet with a breakdown of the new account hacking method being used.

"MEE6 Hack" & "New Account Hacking Method"

The recent discord hacks utilizing MEE6 and compromised admin accounts:

First they will hack an admin account.

Secondly they will create a reaction role feature from MEE6 to give an alternate account admin.

Using this method, they will be able to send webbook messages while hiding who the compromised administrator account is.

Making it more difficult to stop the attack. The best way is to remove MEE6/the webbooks right away rather then trying to identify the compromised account.

So there is this new social engineering method that is very convincing:

This is targeting mainly higher ups in projects: Two things that they use, Collaboration requests with high scale projects, and offering job opportunity's.

They will seem quite convincing. They will then get you into "their" discord server. There will be a fake verification bot, this will most likely be imitating captcha bot, or wickbot. The server will have members and look very legit

Once you interact with these fake bots they will snag your discord token, giving them instant access to your account without 2FA or your password.

How to prevent?:

Always verify the legitimacy of who you are speaking with.

If you join a server and have to verify, always double check if it's the actual bot.

You can ask the person you are working with to be auto roled.

Interlock Web3 Technical Analysis

Interlock posted a technical analysis on Twitter shortly after the phishing attack started.

Recent discord hacks utilizing MEE6 and compromised admin accounts...

Early morning @AxieInfinity posted a short thread warning people that MEE6 bot got compromised and a fake announcement with a malicious link went out.

But this MEE6 hack went further than just posting malicious links, apparently they compromised admin accounts with a new hacking method...

1 They will hack an admin account;

2 they will create a reaction role feature from MEE6 to give an alternate account admin;

3 Using this method, they will be able to send webbook messages while hiding who the compromised administrator account is.

Once you interact with these fake bots they will snag your discord token, giving them instant access to your account without 2FA or your password.

What can you do to prevent becoming a victim?

1 Always verify the legitimacy of who you are speaking with.

2 If you join a server and have to verify, always double-check if it's the actual bot.

3 You can ask the person you are working with to be auto roled.

List of servers hit in the last 10 hours via MEE6:

RTFKT (165k), Alien Frens (74k), Cool Cats (101k), PXN (32k), HAPE (479k), Axie Infinity (739k), PSSSD (80k), My Pet Hooligans (31k), Blockworks (6k), Moonbirds/PROOF (17k), Memeland/9GAG (238k), Magic Eden (194k), Solrarity (166k), Okay Bears (84k),The Habibiz, Lazy Lions (152k), HYUNDAI (142k), Akutars (15k), Gangster All Star (50k)

A total of 2,765,000 users. Kick MEE6 now until you hear more from reputable security specialists. THIS IS STILL ONGOING.

Fact is we need more security in #Web3!

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?

"Another tweet was shared by PeckShield, a blockchain cybersecurity firm, warning users about compromised NFT Discord Server of Memeland, RTFKT, PROOF/Moonbirds and infrastructure company Cyberconnect."

CyberConnect Twitter Warning

CyberConnect shared a warning on Twitter.

"HEADS UP! PLEASE, DON'T CLICK ON ANY LINK! WE WILL NEVER ASK FOR YOUR PRIVATE KEY ON DISCORD! Our team is working to solve the situation with the bot's security in our server!"

"A team member of [similarly hacked] Memeland noted, “a discord bot (mee6) seems to be compromised across various high profile servers.” The mee6 bot is used by the server owners to automate welcome messages and inform about the server rules, events and topics."

"Cyberconnect and Memeland confirmed the hack on their Twitter feeds and warned users to avoid clicking on any link on Discord. Cyberconnect caution that the project will never ask for their private keys. Similarly, Memeland alerted customers about the “fake links” in a message." "Once you interact with these fake bots they will snag your discord token, giving them instant access to your account without 2FA or your password."

"With lots of high-profile crypto projects using Discord, this leakage of information can reveal “not-yet-announced partnerships, upcoming product launches, exchange listings, and coordinate multi-sig signers,” as reported by Fraser."

"The Web3 infrastructure of CyberConnect, a social graph protocol, was also reportedly compromised via a Discord bot that began to pass malware links to users."

"Please help! My 383 ens was stolen! [H]elp!" "[W]hat should I do!!! I clicked and transferred assets!!!! [W]ill they get control of my wallet?" "Metoo! Admin what should [I] do now???????"

"MEE6's employee account was breached & scammers used that account to execute the scams and steal eth. MEE6 support denied it for hours yesterday [before later admitting what happened]."

MEE6 released a statement after the event: "Some servers have reported MEE6 being used to post unwanted messages. There is no technical breach in our systems. This was due to one of our employee's account getting compromised. The issue is now fixed and we've taken all the steps to make sure it never happens again. We take security very seriously, and will always be committed not only to keep our systems safe but also add extra measures to protect servers from accounts being compromised."

NFTHerder reports he "reached out to affected servers as well and they confirmed MEE6 hasn't shared a detailed report or offered reimbursements of misappropriated nfts/eth." "MEE6 has yet to release a detailed report." "[N]o intentions to refund. [T]hey won’t release a public statement cause scared of fud. [E]mployees can still remote access any server."

"As many of you know, our @discord server was compromised yesterday; our team has conducted an in-depth [and] thorough investigation into the incident, and we have created an in-depth report." "We appreciate your patience and continued feedback; as of today, we have implemented additional security measures to prevent a similar breach from ever occurring again."

"Yesterday’s incident was extremely unfortunate and we want to make sure we do everything possible to avoid it from happening again. Below are some of the steps we are taking to improve server security. We’re [now] using a ‘cold admin’ account to protect against phishing attacks on moderators and CyberConnect employees. All unnecessary bots have been removed to reduce the chance of any of them being compromised. Moderators will neither have the ability to grant admin rights to other members, nor will they be able to make significant changes to the server. This way, compromised accounts will pose a significantly lower risk to community members. We are in the process of conducting a Discord security audit by a trusted third-party."

MEE6 Twitter Announcement

The MEE6 team posted an announcement on Twitter to publicly acknowledge what happened.

Some servers have reported MEE6 being used to post unwanted messages. There is no technical breach in our systems. This was due to one of our employee's account getting compromised. The issue is now fixed and we've taken all the steps to make sure it never happens again.

Ultimate Outcome

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

Cyberconnect Twitter Announcement

CyberConnect shared an announcement on Twitter about the exploit.

"To those who were affected by the hack, know that we are actively working on a restitution plan; please fill out this form so we can fully understand the impact of this hack." "If you were one of the community members who interacted with the phishing bot during the attack, approved any smart contracts, or attempted to mint the NFT, we strongly advise you to move valuable assets out of the affected wallet and into a new one. Furthermore, we encourage you to check for any unsolicited transactions that may have taken place."

"We value our community and are pained to learn that some of you have been financially impacted by the hack. If you are a victim of this Discord hack, please fill out [a form] so we can investigate and fully understand the impact this has had on our community. We are working on a restitution plan with the goal of making all affected users whole again."

NFTHerder Reaction After AMA

NFTherder reports that he was not satisfied with the outcome.

Based on the @mee6bot ama I will stop using MEE6 on all future servers:

1) no intentions to refund

2) they won’t release a public statement cause scared of fud

3) employees can still remote access any server

Total Amount Recovered

The total amount recovered is unknown.

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?

Individual Prevention Policies

NFT traders can avoid falling victim to fraudulent minting by carefully reviewing any requests for approval, and double checking any promotions against multiple sources. It is a good idea to always being on guard with mints that promise anything free or dramatically below reasonable market cost.

Any time that you are promised any profit or benefit in exchange for an initial payment, smart contract approval, or deposit, pay special care as to whether the entity making that offer is trustworthy, actually who they say they are, and has the means to fulfill what they're promising. There are no magic algorithms providing guaranteed returns from trading or mining. Trading on average will lose money. Mining is expensive and complex. No one is going to immediately send back more than you sent them. NFT projects will rarely announce a surprise mint in only a single location. Are you fully prepared for the event your money is kept and nothing is delivered in return?

Every approval on Web3 is an opportunity to lose all of the funds present in your wallet. Take the time to review the transaction in full. Fully check over the balance, permissions, and entire address which you are interacting with. Do not trust that your clipboard or any website front-end is guaranteed to provide an accurate address or transaction status. Always perform a test transaction prior to the first high-value transaction in any session.

Private keys can be obtained through seed phrases, mnemonics, private key files, mobile synchronization screens, wallet export features, wallet backups, etc... Never ever send these to anyone else who you do not intend to allow to take all of your money. Attackers will use a wide variety of tactics to convince you like pretending to be your wallet software, pretending they work for the wallet software, or asking you to screen share. Don't fall for them.

Avoid the use of smart contracts unless necessary. Minimize the level of exposure by removing or withdrawing assets whenever possible. Aim to choose smart contracts which have obtained third party security audits, preferably having been audited by at least three separate reputable firms. Pay attention to the audit reports, which smart contracts are covered, and whether the smart contract has been upgraded or modified since the report. Ensure that any administrative functions with the ability to remove funds from the smart contract are under the authority of a multi-signature wallet which is controlled by at least three separate and reputable entities.

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

Platform Prevention Policies

Discord is a common source of vulnerabilities, and requires special care when setting up. If platforms choose to use Discord for communications, their setup should be evaluated by a relevant expert. Access to post new messages should never fall under the control of a single employee or external system.

All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.

A secondary strategy for platforms would be to increase the ability for users to detect the fraudulent websites or minting offers. Never take for granted the limited knowledge of users of your service and their tendency to skip past provided information. It is recommended to design a simple tutorial and quiz for new users which explains the basics of seed phrases, strong password generation, secure two-factor authentication, common fraud schemes, how ponzi schemes work, as well as other risks which are unique to the cryptocurrency space. This tutorial and quiz should ensure their understanding and be a standard part of the sign-up or download process which is difficult or impossible to skip.

Finally, platforms should have some funds set aside to assist with users who fall victim to phishing. Since this can be challenging for small firms to set aside a large treasury and verify the legitimacy of most phishing attacks, the ideal solution would be to pool funds and resources together in an industry insurance fund model.

Work with other industry platforms to set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

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

Regulatory Prevention Policies

The primary strategy for regulators should focus around education for new participants in the space, to ensure a greater understanding. Better security would make it harder to have a Discord breached. An industry insurance fund can serve in the event that all of these measures fail.

Create a standard tutorial and quiz for all new cryptocurrency participants, which is required to be completed once per participant. This tutorial and quiz should cover the basics of proper seed phrase protection, strong password generation, secure two-factor authentication, common fraud schemes, how to detect and guard against phishing attacks, how ponzi schemes work, as well as other risks which are unique to the cryptocurrency space.

All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.

Set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services within the country, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

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