Over $20M Drained from US Government Wallet Holding Seized Cryptocurrencies in Major Security Incident

Details of the Exploit The targeted wallet, labeled "U.S. Government: Bitfinex Hacker Seized Funds," saw its assets moved for the first time in eight months.

A U.S. government wallet containing cryptocurrencies valued at over $20 million was drained in a major security incident. This wallet held funds seized during the investigation of the 2016 Bitfinex hack.

The targeted wallet, labeled "U.S. Government: Bitfinex Hacker Seized Funds," had its assets moved for the first time in eight months. On October 24, withdrawals from the decentralized finance (DeFi) lending platform Aave marked the initial signs of the exploit, according to Arkham Intelligence.

Funds were quickly redirected to a wallet identified as “0x348,” raising concerns for experts monitoring on-chain movements.

Arkham reported the following initial fund movements:

- $1.25 million in Tether (USDT) withdrawn from Aave

- $5.5 million in USD Coin (USDC) from the same platform

Subsequent transfers included:

- $13.7 million in aUSDC, an Aave-based interest-bearing version of USDC

- $446,000 in Ethereum (ETH) to the “0x348” address

A portion of these assets were then transferred by the attacker to instant exchanges, some of which source liquidity from Binance, the world’s largest crypto trading platform. These exchanges enabled the attacker to quickly convert the stolen assets, making it harder to track the funds.

The attacker's movements were designed to obfuscate the funds. Shortly after the initial transfers, about $320,000 in Ethereum was distributed across various exchanges, while smaller amounts totaling $80,000 were dispersed to multiple minor wallets.

Authorities and blockchain sleuths are tracking the transactions and investigating the exploit further. However, the U.S. government has not yet issued an official statement about the breach.

These funds were part of the Bitfinex recovery process, which began when the government seized $3.6 billion from the hack. This month, U.S. authorities started implementing a restitution process for Bitfinex users, allowing them to claim portions of the recovered assets.

But the exploit raises concerns about the safety of seized assets and the possibility of future incidents.

Despite the bear market, on-chain exploits have risen in 2023, with attackers targeting large amounts in both private and public wallets. This includes governmental accounts, highlighting the need for robust security measures to protect digital assets.

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