Kraken Exploit Found/Used By CertiK
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CertiK identified a critical flaw in Kraken's deposit system allowing immediate crediting of client accounts before verifying cleared assets, enabling real-time crypto market trading. The vulnerability led to over $3 million being withdrawn from Kraken's corporate wallets through exploit testing. The exchange failed tests where malicious actors could fabricate deposits and withdraw millions of dollars, converting them into valid cryptocurrencies without triggering alerts. Kraken acknowledged the severity and locked test accounts days after notification. Following fixes, Kraken requested return of funds under its bug bounty. Kraken's security team allegedly threatened CertiK employees regarding crypto repayment without clear instructions. CertiK went public to ensure transparency, urging Kraken to halt threats against ethical hackers. Both Kraken and CertiK claiming no user assets were involved.
This exchange or platform is based in United States, or the incident targeted people primarily in United States.[1][2][3][4][5][6][7]
About Kraken
"a flaw deriving from a recent UX change that would promptly credit client accounts before their assets cleared - allowing clients to effectively trade crypto markets in real time. This UX change was not thoroughly tested against this specific attack vector."
""Starting from a finding in @krakenfx's deposit system where it may fail to differentiate between different internal transfer statuses, we conducted a thorough investigation with three key questions:
1/ Can a malicious actor fabricate a deposit transaction to a Kraken account? 2/ Can a malicious actor withdraw fabricated funds? 3/ What risk controls and asset protection might be triggered by a large withdrawal request?
According to our testing result: The Kraken exchange failed all these tests, indicating that Kraken’s defense in-depth-system is compromised on multiple fronts. Millions of dollars can be deposited to ANY Kraken account. A huge amount of fabricated crypto (worth more than 1M+ USD) can be withdrawn from the account and converted into valid cryptos. Worse yet, no alerts were triggered during the multi-day testing period. Kraken only responded and locked the test accounts days after we officially reported the incident.
Upon discovery, we informed Kraken, whose security team classified it as Critical: the most serious classification level at Kraken."
After initial successful conversions on identifying and fixing the vulnerability, Kraken’s security operation team has THREATENED individual CertiK employees to repay a MISMATCHED amount of crypto in an UNREASONABLE time even WITHOUT providing repayment addresses.
In the spirit of transparency and our commitment to the Web3 community, we are going public to protect all users' security. We urge @krakenfx to cease any threats against whitehat hackers."
"Starting from a finding in @krakenfx's deposit system where it may fail to differentiate between different internal transfer statuses, we conducted a thorough investigation with three key questions:
1/ Can a malicious actor fabricate a deposit transaction to a Kraken account? 2/ Can a malicious actor withdraw fabricated funds? 3/ What risk controls and asset protection might be triggered by a large withdrawal request?
According to our testing result: The Kraken exchange failed all these tests, indicating that Kraken’s defense in-depth-system is compromised on multiple fronts. Millions of dollars can be deposited to ANY Kraken account. A huge amount of fabricated crypto (worth more than 1M+ USD) can be withdrawn from the account and converted into valid cryptos. Worse yet, no alerts were triggered during the multi-day testing period. Kraken only responded and locked the test accounts days after we officially reported the incident.
Upon discovery, we informed Kraken, whose security team classified it as Critical: the most serious classification level at Kraken."
After initial successful conversions on identifying and fixing the vulnerability, Kraken’s security operation team has THREATENED individual CertiK employees to repay a MISMATCHED amount of crypto in an UNREASONABLE time even WITHOUT providing repayment addresses.
In the spirit of transparency and our commitment to the Web3 community, we are going public to protect all users' security. We urge @krakenfx to cease any threats against whitehat hackers."
"Ultimately, the exploitation of a vulnerability in Kraken's systems enabled the withdrawal of over $3 million dollars from Kraken's corporate wallets over a five-day period by abusing the same flaw.
CertiK claims that the transactions were merely testing deposit transactions, with millions being withdrawn from the system for testing purposes.
Certik asserted that millions of dollars of crypto were minted out of air, and no real Kraken user’s assets were directly involved in our research activities.
Notably, they underlined that despite numerous fabricated tokens being generated and exchanged for valid cryptocurrencies over several days, no risk control or prevention measures were enacted until CertiK brought the issue to light.
When Kraken requested that the illegally obtained funds be returned per its bug bounty policy, the researchers refused and instead demanded a speculative ransom payment based on hypothetical maximum losses.
This $3 million exploit formed the basis of Kraken's claim of extortion by bad actors.
However, CertiK alleges this demand was in response to Kraken's own threats after CertiK reported even more severe vulnerabilities.
It should be worthy to note, according to Kraken’s Bug Bounty page, the max pay out for a Critical severity is capped at $1.5 million."
This exchange or platform is based in United States, or the incident targeted people primarily in United States.
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.
| Date | Event | Description |
|---|---|---|
| June 5th, 2024 3:53:49 AM MDT | Initial Vulnerability Found | CertiK's timeline reports that they found the vulnerability at this moment. |
| June 19th, 2024 6:24:00 AM MDT | Kraken Posting Account | Kraken posts their version of events, accusing the CertiK security team of extortion and claiming to have identified and fixed the user interface bug within 47 minutes based on the vague description provided. |
| June 19th, 2024 9:30:00 AM MDT | CertiK Posting Event Version | CertiK posts their version of the events which happened, with a detailed timeline of the exploits. |
| June 19th, 2024 10:04:00 AM MDT | CertiK Claims Fund Return | CertiK claims to have returned the funds to an address which Kraken controls. |
| June 19th, 2024 1:10:00 PM MDT | Speculation Of TornadoCash | There is speculation that CertiK is moving some of the funds through TornadoCash. |
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 has been estimated at $3,000,000 USD.
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
The total amount recovered has been estimated at $3,000,000 USD.
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
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.
References
- ↑ Rekt - Certik/Kraken - Rekt (Accessed Jun 20, 2024)
- ↑ @c7five Twitter (Accessed Jun 20, 2024)
- ↑ Polygon PoS Chain Transaction Hash (Txhash) Details | PolygonScan (Accessed Jun 20, 2024)
- ↑ Polygon PoS Chain Transaction Hash (Txhash) Details | PolygonScan (Accessed Jun 20, 2024)
- ↑ @CertiK Twitter (Accessed Jun 20, 2024)
- ↑ @ImmutableLawyer Twitter (Accessed Jun 20, 2024)
- ↑ @CertiK Twitter (Accessed Jun 20, 2024)