Proof/Moonbirds Discord Compromised

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Moonbirds

Proof_XYZ, the team behind the Moonbirds NFT set, used 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 Moonbirds. The NFT space often has a wide range of time-sensitive opportunities. It's unclear exactly how many users were affected, and it seems that no funds have been recovered. MEE6 has apparently not published further details about what happened. It doesn't appear that Moonbirds or Proof_XYZ made any announcement about the breach on their Twitter.

About Moonbirds

Proof Collective is a podcast hosted by Kevin Rose, a prominent US tech investor and entrepreneur. The podcast explores various aspects of the NFT space through interviews with influential figures. The Proof Collective is a group of NFT collectors and artists who hold a membership NFT, granting them access to a private Discord, early podcast access, IRL (in real life) events, and exclusive collaborations.

Moonbirds are the official profile pictures (PFPs) of the PROOF Collective, with a higher supply than the membership NFT. The Proof Collective consists of 1,000 NFT collectors who share investment opportunities and gain access to exclusive whitelists. The team's experience is reflected in their transparent and consistent communication. They engage with the community through regular updates, town halls, and seeking input on key decisions. The Proof membership offers utility through various NFT drops, whitelist access, and upcoming in-house NFT analysts. The team's vision extends to Project Highrise, their own innovative and engaging metaverse, which has generated much excitement.

Moonbirds implement a "Proof-of-Time" mechanic to discourage flipping and reward long-term holding. Users can nest their Moonbird NFTs to accrue points and unlock benefits, which are lost if the NFT is removed from the nest. The project aims to foster a genuine community through incentivization and engagement. The Moonbirds project has gained significant value, driven by the desire to be connected to Kevin Rose and the PROOF Collective. The future of the project promises more than just free stickers, with community-driven events and opportunities expected.

The strong community behind the Proof Collective played a significant role in the success of Moonbirds. The collective consists of influential NFT collectors and artists, fostering a supportive and informed environment. The gated nature of the community ensures streamlined communication and reduced noise compared to other open communities. In addition to the Proof Membership pass, members received two Moonbirds NFTs, and they had the opportunity to participate in the Grails in-house NFT drop featuring renowned artists.

The Proof Collective, known for their Moonbirds NFT project, has become widely recognized in the NFT space due to its impressive launch and performance. Moonbirds saw a remarkable surge in value, surpassing even popular NFT projects like Bored Ape Yacht Club and CryptoPunks. The project raised $60 million upon launch and achieved a total trading volume of $238 million.

The project is described on their homepage and OpenSea collection page.

Moonbirds are art collectors, creatives, and dreamers. Our community is a home for those seeking real connection as we all contribute to the future of web3 art, culture, and technology.

To some, the “art world” can feel daunting or stuffy; a cryptic pastime reserved for those with sufficient insight and deep pockets.

It doesn’t have to be that way. We’re in the midst of a cultural revolution—a digital renaissance—in which art is being transformed into something everyone can appreciate, own, and share. Our goal is to create unique experiences for collectors to connect with artists to own and champion their art. And to have a lot of fun along the way.

Moonbirds is the art collector’s PFP. Each of the 10,000 digital artworks in the collection grants holders access to unique experiences to connect with artists and own and champion their art. As a community, Moonbirds is a home for creatives, dreamers, and collectors seeking real connection as we all contribute to the future of web3 art, culture, and technology. Moonbird art is entirely in-chain, meaning the images are outputted directly from the smart contract, with no need for storage on IPFS or the like. There are also a number of customisable backgrounds available to holders based on their on-chain activity (such as other NFT holdings)—which disappear when the bird is transferred. You can check what each bird looks like with the different backgrounds (and see if they have any unclaimed rewards!) on our site.

About MEE6

MEE6 is a popular Discord bot trusted by millions of Discord servers worldwide for managing, entertaining, and growing their communities. 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.". The bot has been active for two years and is known for its levels and auto-moderation capabilities, as well as its paid music and record features. MEE6 is a user-friendly Discord bot that offers a range of features including custom commands, moderation tools, leveling systems, Twitch and YouTube notifications, and more. Users can personalize MEE6 by changing its avatar, name, AI-based backstory, and activity, making it fit seamlessly into their server's universe and branding. MEE6 aims to continually improve and introduce new features based on community feedback and input. The bot's developers prioritize the needs and preferences of their users, considering them the driving force behind their work. MEE6 provides support through a dedicated server and maintains a presence on platforms like GitHub.

Welcome Messages can be set up to provide new members with personalized greetings and information about server rules and topics. Advanced Custom Commands allow users to automate tasks, manage roles, and send predefined messages. MEE6 also offers Twitch and Social Media Alerts, Discord Reaction Roles, a leveling and XP system, and more. It is used by a wide range of servers, including those focused on Minecraft, Roblox, PUBG Mobile, MrBeast Gaming, and others. MEE6 can also assist with server protection through auto-moderation filters and facilitate giveaways. Additionally, it offers the ability to record voice and conversations in Discord with a simple click.

The Reality

Discord vulnerabilities:

"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."

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.

"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]."

Key Event Timeline - Proof/Moonbirds Discord Compromised

Date	Event	Description
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 17th, 2022 7:29:00 PM MDT	Warning By WIMPZ	Twitter user WIMPZ warns that "[i]f using MEE6 in your Discord, it has been compromised/hacked - per sources. RTFKT and Moonbirds/Proof may have been hit."
May 17th, 2022 7:45:00 PM MDT	Warning By Mina	Twitter user Mina Gameel warns that the "Mee6 bot is hacked[, w]hich is used in alot of NFT Discord". She mentions that Memeland, RTFKT, and Proof servers have all been hacked, and warns to "[b]e [c]autious" and not to "click any links" or "connect your wallet".
May 17th, 2022 8:10:00 PM MDT	UnusualEss Tweet	Twitter user UnusualEss reports that "[t]here appears to be a hack involving MEE6 circling different servers,memeland/moonbirds discord affected.Remember to never click any surprise links,Stay vigilant out there frens & watch out for any other discord hacks.
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 8:26:00 PM MDT	Blabre Warning Tweet	Blabre warns the "MEE6 is hacked, all the discord that are facing issues. Kick MEE6 out of the server." He includes Memeland, CloneX, RTFKT, and Moonbirds in his tweet as affected discords.
May 17th, 2022 8:31:00 PM MDT	Zeneca Warning Tweet	"Hearing multiple reports that the Mee6 bot has been compromised and certain high-profile Discord servers have been hacked all at once (RTFKT, PROOF/Moonbirds, PXN, 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 9:48:00 PM MDT	Ryuk Developer Warning	Ryuk publishes a warning on Twitter about high profile discords being hacked including RTFKT, Memeland, PXN, Moonbirds, and Cool Cats "within the last hour" and "recommend[s] removing MEE6 from your servers".
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 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 2:58:00 AM MDT	Tricky NFTs Warning	Twitter user Tricky NFTs posts a warning on Twitter about compromised on a large number of Discord channels including RTFKT, Alien Frens, Cool Cats, PXN, HAPE, Axie Infinity, Proof, PSSSD, My pet hooligans, Blockworks, Rolimons, Roblox, Moonbirds, Memeland, XQC, Magic Eden, Solrarity, Okay Bears, HABIBIZ, and Lazy Lions.
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 11:28:00 AM MDT	RyanCAD Summary Published	Twitter user RyanCAD publishes a "thread summarizing the recent Discord attacks of several high-profile servers including @CoolCats, @RTFKT, @projectPXN, @moonbirds and more". This includes a summary of how the bot behaved as well as the particular actions which were taken along with a log file from RTFKT. His recommendation is to change your password frequently.
May 18th, 2022 3:22:00 AM MDT	Jacob H List Published	Jacob H publishes a list of "[s]ervers hit in the last 8 hours via MEE6" which include 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), and Magic Eden (194k).
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 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 11:02:51 AM MDT	NFTEvening Negligence Article	The NFTEvening news site publishes an article originally titled "NFT Twitter Accuses Discord Bot MEE6 of Negligence" and later titled "MEE6 Discord Bot Accused of Negligence". They report that NFT Twitter is accusing the developers of the MEE6 Discord bot of negligence as the bot was manipulated by NFT hackers to compromise numerous high-profile Discord servers. Around 70 Discord servers, including those of popular NFT projects like RTFKT and Cool Cats, were exploited in May, with 26 of them breached through the MEE6 bot. NFT Twitter users are demanding a detailed report from MEE6 in response to the breaches. The MEE6 bot, used by over 18 million servers, is being criticized for enabling spam messages and malware links, allowing hackers to manipulate servers and exploit the trust of the Discord community. Improved Discord security measures are needed to prevent further incidents in the NFT community.
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

There was significant reaction on Twitter.

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."

"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."

Community Reactions On Twitter

There appears to be a hack involving MEE6 circling different servers,memeland/moonbirds discord affected.Remember to never click any surprise links,Stay vigilant out there frens & watch out for any other discord hacks.

Tweet Shared By MEE6

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."

Ultimate Outcome

While some members of the community requested further information and a detailed report, it doesn't appear that MEE6 has published any further information on the exploit.

NFTHerder Reaction After AMA

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."

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

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?

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.