Bitmain is suing ‘John Doe’, an unknown hacker who gained access to Bitmain’s Binance account on 22 April 2018. Ultimately 617 bitcoins worth USD 5.5 million were stolen from Bitmain, the largest cryptocurrency mining firm on the planet.
The scheme the hacker used to steal the bitcoins was unique. Instead of directly withdrawing cryptocurrency from Bitmain’s account, likely impossible due to some sort of 2FA requirement, the hacker manipulated the MANA market to steal Bitmain’s bitcoins. MANA is the native cryptocurrency of decentraland, and its trading volume of only USD 10 million per day on average makes it an easy target for market manipulation.
After the hacker gained access to Bitmain’s bitcoins and ether, they placed large buy orders for MANA. This caused a rally in daily trading volume from USD 10 million to over USD 100 million. Part of this price rise can be explained by other traders thinking this was a legitimate MANA rally and jumping in. Globally, MANA’s average price jumped from USD 0.12 to USD 0.23 during the hack, an impressive 90% rise. On Binance, the price rise was even more drastic, with a peak price of USD 0.34, a 180% increase.
The hacker likely had a large amount of MANA on hand before the hack, and they filled Bitmain’s overpriced MANA buy orders. Then the hacker placed orders to buy Mana at prices far below the market value and used the Bitmain wallet to match these orders. The combination of these mechanisms drained USD 5.5 million of bitcoin from Bitmain’s wallet in a single day, without directly withdrawing cryptocurrency from Bitmain’s wallet.
After the bitcoins were siphoned into the hackers wallet, the hacker proceeded to trade for other cryptocurrencies and withdraw funds. Some of these funds were withdrawn to Bittrex and other unnamed cryptocurrency exchanges. Essentially, the hacker mixed the coins to obfuscate the trail.
Bitmain is suing the hacker for unauthorized access, computer trespass in the 2nd degree, electronic data theft, the USD 5.5 million of stolen cryptocurrency, and attorney fees. A key part of this lawsuit will involve subpoenas to obtain information from Binance and Bittrex, in order to gain enough information to identify the hacker and proceed with the criminal case.
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