Recently, Bybit was hit with a significant $1.4 billion hack involving Ethereum, with suspicions pointing towards a connection to the infamous Lazarus group. As a result, a mass exodus of investors occurred, seeking to withdraw their assets from the cryptocurrency platform.
Bybit’s founder and CEO, Ben Zhou, noted a surge in withdrawal requests following the breach. Surprisingly, the exchange managed to handle over 350,000 withdrawal requests smoothly amidst the chaos.
“Since the cyberattack, Bybit has witnessed a record-breaking number of withdrawal demands, surpassing any previous instances. We have processed a total of more than 350,000 withdrawal requests.”
So, what led to the system’s compromise, and is there a possibility of recovering the funds exceeding $1 billion?
A Detailed Account
According to reports from Bybit, the breach resulted from a sophisticated attack that deceived signers into unwittingly surrendering control of the platform’s multi-signature cold wallet.
Around 400,000 ETH was illicitly transferred from the compromised cold wallet to the hacker’s address, then fragmented into 10,000 ETH portions distributed across several addresses. Notably, blockchain investigator ZachXBT has successfully traced and linked these addresses to the North Korean Lazarus group.
Following the incident, CryptoQuant observed a sharp decline in Bybit’s ETH reserves, plummeting from 443,000 ETH to approximately 39,000 ETH.
Moreover, the repercussions weren’t confined to ETH investors alone. According to analysis by CryptoQuant’s Dark Frost, as apprehensions heightened, investors withdrew 713 BTC from the platform.
“The looming presence of FTX in the market induced fear, prompting a surge in withdrawals from Bybit. This shift was noticeable in the case of BTC, with 713 BTC being withdrawn simultaneously.”
Prospects of Fund Recovery for Bybit
Allegedly, Bybit sought ETH loans from Bitget and Binance to manage the escalating pressure of withdrawals due to its diminished ETH reserves. For instance, SpotOnChain disclosed that Bybit had secured over $170 million in ETH loans.
“In the past 7 hours, Bybit has obtained $172.5 million in loans from various exchanges and institutions to facilitate customer withdrawals, including 40,000 ETH ($107 million) from Bitget, 12,652 stETH ($33.9 million) from MEXC’s hot wallet, and 11,800 ETH ($31.6 million) from Binance’s hot wallet.”
However, despite these measures, Bybit still faces a shortfall in recovering the stolen $1.2 billion. Nevertheless, the platform’s CEO reassured users of its solvency and capability to reimburse all losses.
“Bybit remains financially stable, even in the absence of recuperating the losses from this breach. All client assets are fully secured, and we have the capacity to cover the loss.”
Yet, the crucial question remains – can Bybit successfully retrieve the embezzled funds?
According to ZachXBT,
“A partial recovery is more plausible (around 15-30% in an optimistic scenario), albeit the challenge of laundering $1.46 billion. Much will depend on the patience of the perpetrators.”
Notable figures such as Samson Mow and Arthur Hayes have advocated for Ethereum’s founder, Vitalik Buterin, to consider a rollback of the chain for fund restitution. Mow urged,
“I am in favor of reorganizing Ethereum’s chain (if necessary) to ensure the stolen ETH returns to Bybit_Official and to prevent the North Korean government from leveraging these funds for their nuclear weapons program. Vitalik Buterin, this action is imperative.”
As of the latest update, Buterin has not issued a statement. Meanwhile, ETH experienced a 7% decline before stabilizing at $2.68k.