Crypto Hacks Are Down and Hackers Tend to Return Stolen Money

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Hacker stole around $400 million from crypto projects in 40 attacks in the first three months of 2023, blockchain firm TRM Labs said in a new report.

This is a 70% drop from the first quarter of 2022.

The average size of hacks has also decreased, according to TRM, from $30 million in 2022 to $10.5 million for the same period in 2023.

Hackers are also increasingly returning the money they steal, settling for a white hat reward from exploited projects. Hacking victims recovered nearly half of stolen funds in 2023, according to TRM Labs estimates.

For example, an attacker who exploited the TenderFi protocol returned half of the $1.6 million he made from the attack (TenderFi paid a bounty of $850,000 in return). Similarly, the hacker behind the Euler Lending Protocol exploit has also agreed to return the $200 million worth of crypto he got away with. Both hacks took place in March. In April, the hacker who dumped the Safemoon protocol returned $7.1 million worth of crypto, keeping the rest of his $9 million loot.

A possible explanation could be increased regulatory attention on crypto hacks and a number of high-profile enforcement cases, TRM Labs suggests. First, crypto exchanges are tightening their KYC/AML policies, making it harder to cash out stolen coins. At the same time, the ETH Tornado Cash mixing protocol, which has been one of the most popular money laundering tools for Ethereum so far, has been under US sanctions since August 2022, which has automatically downgrade all Tornado-related funds for any regulated exchange.

Additionally, the case of Avraham Eisenberg, who became the first known person to be arrested for a DeFi exploit, could serve as a warning sign. Eisenberg exploited the Mango Markets protocol and admitted it publicly, exposing the protocols vulnerability. He was arrested in Puerto Rico in December.

The ability to trace and track stolen funds has just improved, not only by investigators using blockchain intelligence like TRM, but by Twitter sleuths using open source tools and has created an environment where funds hacked are publicly tracked in real time, TRM Labs’ head of legal and government affairs, Ari Redbord.

Malicious hackers find it increasingly difficult to release funds and therefore settle for bug bouunties. We also see so-called white hat hackers increasingly becoming part of the ecosystem and could be a useful way for DeFi services to tighten cyber controls,” Redbord added.

In March, Crystal Blockchain estimated the total cost of hacks and scams at $119 million. DeFi protocols remain a favorite target for attackers, as complex smart contracts are often subject to manipulation. According to Chainalysis, DeFi exploits account for 82% of all stolen crypto in 2022.

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