RTFKT Discord Breach

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RTFKT

NFT platform RTFKT 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 RTFKT. The NFT space often has 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. RTFKT doesn't appear to have made a public announcement, much less any reimbursement, however they did provide a later educational session along with Ledger via Discord.

About RTFKT

Founded in 2020 by Benoit Pagotto, Chris Le, and Steven Vasilev, RTFKT utilizes game engines, NFTs, blockchain authentication, and augmented reality to redefine the boundaries of physical and digital value. RTFKT is a creator-led organization that combines game engines, NFTs, blockchain authentication, and augmented reality to create unique experiences in fashion, sneakers, and digital artifacts. They are known for their viral sneaker designs, collectibles, 3D & AR wearables, avatars, and original art. Despite rumors of using a rogue AI for design, RTFKT denies these claims and asserts that there is no evidence or legal action supporting them. Previously operating in the shadows, they formed an entity in January 2020 to expand into the public metamarket, resulting in excellent response and rapid social growth. They partnered with artist Takashi Murakami for the Clone X avatar collection, fostering a global community that empowers each other to learn and create interactive experiences. RTFKT aims to accelerate the digital future due to the accelerated development of human consciousness.

We are a creator led organisation. RTFKT uses the latest in game engines, NFT, blockchain authentication and augmented reality, combined with manufacturing expertise to create one of a kind sneakers and digital artifacts.

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.

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.

In a single week in mid-May "alone, [at least] 5 NFT discord hacks were observed. Discord servers of NFT projects including the Memeland, RTFKT, CLONEX, PXN, and Moonbird were compromised along with the NFT video game Axie Infinity, after Mee6 bot was hacked." "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." "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."

"When RTFKT had their hack they were able to see the MEE6 bot was the culprit."

"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."

"In 10 min we go live again with @Ledger office hours in our discord. Topics: (1) Blind signing vs clear signing. (2) Ledger connect. (3) Discord bots / fake links."

What Happened

The RTFKT NFT community fell victim to a phishing attack on Twitter.

Key Event Timeline - RTFKT Discord Breach

Date	Event	Description
December 13th, 2021	Nike Acquires RTFKT	Nike has announced its acquisition of RTFKT, a brand known for its innovative approach to creating virtual products and experiences that merge culture and gaming. The acquisition is seen as a strategic move by Nike to accelerate its digital transformation and expand its presence in the intersection of sport, creativity, gaming, and culture. The terms of the deal have not been disclosed. Nike aims to invest in the RTFKT brand, nurture its creative community, and leverage its expertise to enhance Nike's digital footprint. The acquisition aligns with Nike's commitment to innovation, creativity, and community-building in the metaverse.
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 13th, 2022 5:40:00 AM MDT	MEE6 NFT Engaging Tweet	"What does #web3 mean for you? Which defining feature of #web3 do you find most important?".
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 8:17:00 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	MEE6 Official Support Denying Hack	"As per MEE6 official support: MEE6 was not hacked. Admins in the servers where compromised which allowed them to use MEE6 features to post messages".
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 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 2:13:00 AM MDT	Questioning About MEE6 Denial	"Seems strange that 20+ servers using MEE6 got hacked simultaneously today... Are you sure that 20 admins got hacked at the same time in the same day?"
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 3:22:00 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 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 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 10:52:00 AM MDT	RTFKT Ledger Office Hours	The RTFKT team works with Ledger and announces a live show to cover "[b]lind signing vs clear signing", "Ledger connect", and "Discord bots / fake links".
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". The article reports that NFT Twitter has accused the developers of the Discord bot MEE6 of negligence after discovering that NFT hackers were exploiting the bot to hack numerous high-profile Discord servers. An on-chain analyst highlighted that 26 out of 70 breached servers were compromised through the MEE6 bot, but the developers have not provided a detailed report in response. Other Discord users expressed their disappointment and called for the developers to take more responsibility. The MEE6 bot, used by over 18 million servers, allows users to assign roles and performs basic moderation tasks, but its popularity has made it a target for NFT hackers who send spam messages and malware links. The incidents have raised concerns about Discord security and the need for improved measures to protect NFT Discord servers.
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. "y'know what would be even cooler? Addressing the fact that because of your MEE6 over 200 eth was stolen and you've been dodging communication ever since."
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".
June 10th, 2022 3:59:00 PM MDT	Jack Tracante Information	Jack Tracante has some additional information on how servers are managed. "The channel with these logs can only be seen by a few people so we know exactly what happened. When RTFKT had their hack they were able to see the MEE6 bot was the culprit for example."

Technical Details

The exploit follows a two-step process: first, hackers target and compromise an admin account, and then they use the MEE6 bot to create a reaction role feature that grants administrative privileges to an alternate account. This allows them to send webhook messages while concealing the compromised admin's identity, making it challenging to stop the attack. To prevent falling victim, it is advised to always verify the legitimacy of individuals you communicate with, double-check the authenticity of verification bots in Discord servers, and consider using auto role features for added security. Several high-profile servers, including RTFKT, Alien Frens, and Axie Infinity, have been impacted, emphasizing the need for enhanced security measures in the Web3 space.

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 presently unknown.

Immediate Reactions

NFT Twitter reportedly accused the developers of the Discord bot MEE6 of negligence after discovering that NFT hackers were exploiting the bot to hack numerous high-profile Discord servers. An on-chain analyst highlighted that 26 out of 70 breached servers were compromised through the MEE6 bot, but the developers have not provided a detailed report in response. Other Discord users expressed their disappointment and called for the developers to take more responsibility. The MEE6 bot, used by over 18 million servers, allows users to assign roles and performs basic moderation tasks, but its popularity has made it a target for NFT hackers who send spam messages and malware links. The incidents have raised concerns about Discord security and the need for improved measures to protect NFT Discord servers.

Ultimate Outcome

The incident was included in a list of hacks prepared by NFTHerder.

Total Amount Recovered

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

Ongoing Developments

"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."

Individual Prevention Policies

NFT traders can avoid falling victim to fraudulent minting by not making rushed decisions, double checking any promotions against multiple sources, and avoiding mints that seem to be too good to be true.

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.