Hacking Rises, FBI Warns Crypto Investors About DeFi Platform. The FBI is warning investors about the risks facing decentralized financial platforms (DeFi) from hackers stealing cryptocurrencies. The FBI also urged investors and DeFi platforms to step up efforts to ward off hacker attacks.
“Cybercriminals are increasingly exploiting vulnerabilities in smart contracts governing the DeFi platform to steal cryptocurrencies, causing investors to lose money,” the FBI said in a new public service announcement.
The FBI added that cybercriminals are trying to take advantage of the increasing investor interest in cryptocurrencies, as well as the complexity of cross-chain functionality and the open source nature of the DeFi platform.
In smart contracts, the terms of the agreement between the buyer and seller are written directly into lines of code on the blockchain network. Cybercriminals have tried to manipulate the complexities of blockchain and DeFi platforms to their advantage.
The FBI warns criminals have exploited signature verification on the DeFi platform, allowing the perpetrators to steal all of the platform’s investments, resulting in millions of losses.
The agency has also witnessed criminals exploiting so-called express loans, which use smart contracts on blockchains that don’t let funds change hands unless certain rules are met.
Hacking Rises, FBI Warns Crypto Investors About DeFi Platform. In its announcement, the agency showed analysis from blockchain analytics firm Chainalysis between January and March 2022, cybercriminals stole $1.3 billion in cryptocurrencies, nearly 97 percent of which was stolen from the DeFi platform.
Chainalysis found in a separate report crypto losses to hacking had spiked in 2022, with more than $202 million stolen in August in addition to $1.9 billion in investor funds lost through the end of July, a 37 percent increase from last year.
The FBI urges investors to research the DeFi platform and seek an independent audit of the platform’s code base to identify vulnerabilities in the code before putting money into a project.
At the same time, the FBI is urging the DeFi platform to use real-time analytics and testing code to identify vulnerabilities and protect against hacking.
Previously, the FBI recently issued a warning to consumers about various fake crypto apps that have defrauded 244 victims of around $42.7 million since October 2021.
This was conveyed by the FBI in a warning letter, published on Monday, July 18, 2022 local time. “The FBI has observed cybercriminals contacting U.S. investors, fraudulently claiming to offer legitimate cryptocurrency investment services, and convincing investors to download fake mobile apps, which have been used by criminals to defraud cryptocurrency investors,” reads the FBI’s warning letter. 20/7/2022).
The FBI identified one case in which individuals operating under the company name YiBit defrauded victims of $5.5 million, and another in which individuals pretending to be US financial institutions managed to defraud investors of $3.7 million.
YiBit convinces its users to download the YiBit app and deposit crypto. After this deposit, 17 victims received an email stating they had to pay taxes on their investment before withdrawing the funds. Four victims could not withdraw funds.
The FBI said another app, called Supayos, or Supay, also scammed investors by asking for deposits and then freezing one user’s funds after telling him the minimum balance requirement was $900,000.
More than 99 percent of Gen Z and 98 percent of millennials use mobile banking apps regularly, and the FBI encourages investors and financial institutions to be wary of unsolicited requests to download investment apps.
The FBI recommends verifying applications and companies are legitimate before providing them with any personal financial information.
Earlier, the UK central bank’s deputy governor for financial stability, Sir Jon Cunliffe, warned cryptocurrencies were highly vulnerable to sentiment and had the potential to collapse. He urged regulators to “get on with the work” and regulate crypto immediately.
“Financial assets with no intrinsic value are only worth what the next buyer will pay. Therefore they are inherently volatile, highly vulnerable to sentiment and prone to collapse,” said Cunliffe quoted from Bitcoin.com, Tuesday (19/7/2022).
He describes some crypto assets as purely speculative, unsupported, stating bitcoin, for example, has nothing behind it. He also repeated his previous warning that if one invests in crypto assets, one should be prepared to lose all the money.
The UK central bank added that the recent volatility in the crypto market does not pose a risk to the financial system as a whole, as cryptocurrencies are not sufficiently integrated into other financial systems.
However, Cunliffe stressed that the line between crypto and traditional financial systems will become “more and more blurred”.
Hacking Rises, FBI Warns Crypto Investors About DeFi Platform. He said that without action, systemic risks will emerge, especially if crypto activity and its relationship with other banks and markets continue to grow. He stressed regulators need to “get on with the work” and bring crypto within the “regulatory perimeter.”
“The interesting question for regulators is not what will happen next with the value of crypto assets, but what we need to do to ensure prospective innovations can occur without incurring increases and potential systemic risks,” said Cunliffe.
Federal Reserve Vice Chair Lael Brainard also said last week crypto financial systems are “vulnerable to the same risks” as traditional finance.
“Future financial resilience will be greatly enhanced if we ensure regulatory boundaries span the crypto financial system and reflect the same principles of risk, equal disclosure, equal regulatory returns,” Brainard said at the time.
Last week, the Governor of the UK’s central bank, Andrew Bailey also told UK lawmakers that cryptocurrencies have no intrinsic value, warning that unbacked crypto assets are “very high risk.”