As Halloween approaches, it’s not just ghosts and ghouls lurking in the shadows—digital payment scams are on the rise too. Here are some recent horror stories that are fortunately entirely unavoidable, and the lessons that these stories highlight about the importance of crypto security.
North Korean attackers exploit vulnerability on Google Chrome
The victim: various users of a crypto game website
The horror story:
The North Korean hacking group Lazarus, also known as Hidden Cobra, was recently found using a new Chrome vulnerability to steal cryptocurrency.
Lazarus, active since 2009 and likely backed by North Korea, has targeted cryptocurrency exchanges and users to fund the regime, stealing over $1 billion in 2023 and $1.7 billion in 2022. This latest attack, flagged by Kaspersky, involved a fake cryptocurrency game website that exploited a serious vulnerability (CVE-2024-5274) in Chrome’s V8 JavaScript engine, which was patched in Chrome version 125 in May. The vulnerability allowed attackers to run malicious code, bypass security, and access the browser’s memory, allowing them to steal data. Another flaw allowed them to break out of Chrome’s security sandbox in March 2024.
The attackers used this access to gather system data and determine if malware should be deployed to steal cryptocurrency from users’ wallets. To promote the fake game, which copied a real game's logo and design, Lazarus created social media accounts and tried to engage cryptocurrency influencers. The real game’s developers later reported $20,000 missing from their cryptocurrency wallet.
Falling for scams like these can be avoided by educating yourself and your clients to be wary of browser extensions and understand how to verify the website authenticity of a site that involves cryptocurrency. With the rising popularity of Phishing scams, which rely on victims interacting with seemingly-familiar but fake links, it is also crucial to be able to identify malicious websites and addresses.
Duo accused of stealing $230M for Extravagant Spending Frenzy
The victim: a bitcoin trader and a kidnapped Connecticut couple
The horror story:
Two young men have been accused of stealing $230 million in bitcoin from a Washington, D.C. resident and going on a lavish spending spree. They allegedly bought luxury cars, rented mansions, and spent $500,000 on bar tabs, court filings reveal. Authorities suspect a Connecticut couple’s kidnapping might be connected to the theft, with the kidnappers reportedly targeting the couple to demand ransom from their son, who is under investigation for his possible role in the heist.
One of the suspects, Jeandiel Serrano, was found wearing a $500,000 watch at his arrest in Los Angeles, while his co-defendant, Malone Lam, rented luxury homes and bought exotic cars, including a $2 million watch and multiple Lamborghinis. The FBI caught the two after tracing their digital activities, with both admitting their roles in the heist.
The cyberattack involved social engineering to access the victim’s Google and Gemini accounts, allowing them to steal the bitcoin. The stolen funds were divided among the conspirators, who used advanced money-laundering tactics. So far, about $70 million has been recovered or frozen, but over $100 million is still missing.
Three weeks after the heist, a Connecticut couple driving a Lamborghini was kidnapped by six men who believed the couple’s son had access to significant cryptocurrency holdings. The kidnappers reportedly threatened to kill the couple if they didn’t cooperate, but fled after a van crash led to their arrest.
The son’s connection to the case remains under investigation.
One can avoid social engineering scams in the cryptocurrency space by remaining updated with strategies to secure your assets or the finances of clients. Using 2FA on all accounts related to cryptocurrency adds an extra layer of security, making it harder for attackers to access your accounts even if they obtain your password. Additionally, following Crypto compliance methods to report suspicious activity to the appropriate authorities, in order to protect others from falling victim to the same attackers.
The major collapse of Mt Gox
The victim: Investors of Mt Gox
The horror story:
The collapse of Mt Gox in 2014, one of the largest Bitcoin exchanges globally at the time, was caused by a combination of security failures, poor management, and a massive hack, that led to the loss of $450M in bitcoin.
The theft of bitcoin from Mt Gox’s systems over an extended period took place over several years, with hackers exploiting security weaknesses gradually. This went unnoticed for years due to…
Mt Gox’s poor technical and management skills, which lacked robust infrastructure and security protocols suitable for a high-stakes financial exchange. Possible reasons for this is because before pivoting to Bitcoin Trading, it was initially a trading platform for Magic: The Gathering cards, rather than a crypto exchange. Mt Gox also had a chaotic accounting system that struggled to track balances accurately, making it difficult to detect the ongoing theft or discrepancies when assets were moving around. Identifying missing funds became very challenging. Then, in early 2014, Mt Gox suspended all withdrawals, citing technical issues and blaming Bitcoin transaction malleability for any delays. However, at this point, a large portion of Bitcoin had already been siphoned out of the exchange.
Once they announced that they were unable to process withdrawals and exchanges, it triggered widespread panic with customers fearing for their funds. The company filed for bankruptcy in Japan, revealing that most of the cryptocurrency had disappeared, and with it, all confidence in Mt Gox. In 2019, the CEO was convicted of tampering with financial records but was acquitted of embezzlement charges.
The Mt Gox case serves as a cautionary tale specifically for those who run trading platforms. The importance of organized management and record-keeping cannot be overstated, it is the first line of defense, providing an audit trail and proof for suspected theft or attacks. This case also led to the shift towards DeFi platforms and decentralizations as a whole, to avoid the issues allegedly suffered by Mt Gox.
The mysterious disappearance of Stephen Macaskill of Dasset Crypto exchange
The victim: Investors of Dasset crypto exchange
The horror story:
Macaskill, CEO of New Zealand based cryptocurrency exchange Dasset, has been missing since the company’s financial troubles surfaced.
Dasset collapsed in August 2023, leaving approximately $6.3 million in customer funds unaccounted for. Dasset faced scrutiny from the Financial Markets authority in New Zealand for failing to comply with financial regulations. While the company did not meet the necessary legal requirements of a crypto trading platform, users and investors lost confidence in the company.
Users began to withdraw their funds on mass, and Dasset then experienced a liquidity crisis, making it difficult to meet with the withdrawal requests, further damaging its reputation. Dasset faced allegations and concerns regarding the management of customer funds. Issues related to how Dasset handled its financial operations and allegations about engaging in risky practices certainly contributed to the collapse of the Dasset exchange.
While liquidators and New Zealand’s Serious Fraud Office have been attempting to trace the missing assets, their efforts have been impeded by Macaskill’s disappearance. Macaskill allegedly holds key information about Dasset’s operations, and his absence has stalls investigations.
The SFO has initiated an inquiry, and the Financial Markets Authority has been collecting details from affected customers who suffered significant losses due to Dasset’s collapse. The liquidators have traced several unexplained transactions involving offshore crypto exchanges, but the investigation’s progress is still limited.
The moral of the Dasset collapse is the absolute importance of crypto compliance. Crypto compliance is essential to mitigate financial crime risks, safeguarding assets by ensuring industry legitimisation, responsible trading with support of regulatory authorities, and utilizing frameworks to prevent money laundering, terrorist financing and fraud through Anti-Money Laundering and Know Your Customer regulations.
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