Analysis provider claims it can trace the $17.1 million stolen in the Kucoin hack

Kucoin ERC20 Theft

Elliptic, a blockchain analysis service provider, said that the Kucoin hacker has sold $17.1 million in tokens through decentralized exchanges (DEX) platforms including Uniswap, Kyber Network, and Tokenlon, reports

The move to DEX platforms comes as a result of centralized projects helping the hacked bitcoin exchange by preventing any cashing out of the funds associated with the hack. Elliptic said it has noticed stolen tokens being swapped with Bitcoin, which is a censorship-resistant cryptocurrency. However, Elliptic claimed its technology is able to track the activity of such funds. 

Tom Robinson, the co-founder of Elliptic, said in a blog post that out of all stolen tokens, approximately $152 million was made up of Ethereum-based tokens (ERC20s), including Tether (USDT), Chainlink (LINK), and Ocean Protocol (OCEAN).

He said that such assets are developed on blockchains like Ethereum by “organizations that have the power to freeze accounts and recover the tokens.”

On September 30, Kucoin said it retrieved around $140 million after a collaboration with 10 projects – it either swapped or replaced the stolen assets. Referring to the blocked route, Robinson said the hacker(s) “tried to sell some of the tokens at two regular exchanges.”

He added that this avenue was blocked as soon the exchanges applied the blockchain analysis tools. These tools, such as the one Elliptic uses, are able to “identify whether deposited crypto assets originated from the Kucoin hack, and freeze any accounts receiving such funds.”

Hackers are nowadays able to swap the stolen assets for Ether or other ERC20s thanks to dex platforms, which are a clear choice among money launderers due to their substantial volumes and lack of KYC checks.

However, Robinson claimed that his company has tools that are able to track the movements of these stolen assets. 

“Unlike centralized exchanges, which are dead-ends when it comes to tracing the flow of funds, with DEXs everything is recorded and visible on the blockchain.”

At the moment, Kucoin managed to get back $140 million while $17.1 million seems unrecoverable. It is still to be determined whether the exchange will manage to recover the remaining $124 million, which is swapped with censorship-resistant cryptocurrencies.

Kucoin was hacked on September 25, 2020, with the initial losses predicted to be close to $150 million. Shortly after, Larry Cermak, the Director of Research at the Block Crypto Today, estimated that the hacker stole around $280 million in the breach.

“So I did some accounting of the Kucoin hack based on the wallets very likely associated and based on my estimation, there was nearly $280 million of assets stolen, not $150M,” Cermak said at the time. “This would make it the third-largest hack in history and [seven] times larger than the Binance hack last year,” Cermak added.

One of the main subjects in the crypto community was about ERC20 projects that had found ways to overturn the hack or freeze the stolen assets. However, some ERC20 projects either restarted, froze, or paused their protocols to prevent the hacker from dumping their tokens.