$1.7 million lost: DeFiance Capital founder Arthur Cheong became a victim of the hack

Arthur, a founder of DeFiance Capital — a leading Web3 crypto venture fund that is focused on DeFi and Blockchain Gaming, became a victim of the crypto hack.

Arthur has figured out something strange, namely NFTs on his hot wallet were transferred out to some external address:

Well not sure what happened, need to take time to figure it out. Didn’t expect this to happen to me as well.

Guess no more hot wallet usage then.

— Arthur0x (@Arthur_0x) March 22, 2022

Later, it was found out that Arthur received a phishing email, which contained content that seems like general industry-relevant content. Opening the attached file made it possible for the hacker to install malware on Arthur’s device, which extracted the seed phrase of his hot wallet and as a result, the hacker gained wallet access.

Found out the likely root cause for the exploit, it’s a targeted social engineering attack. Received a spear-phishing email that really seems to be sent by one of our portco with content that seems like general industry-relevant content.

They are likely targeting all crypto peep pic.twitter.com/SegYBcoLX2

— Arthur0x (@Arthur_0x) March 22, 2022

“Ok it’s a private key/seed phrase compromise since this little shit is still transferring some token out” — Arthur says.

The hacker stole 59 NFTs including 5 CloneX, 17 Azuki, 2 Tsubasa, 2 Hedgies, 33 Second Self. Other tokens transferred by the hacker were WETH, Lido DAO Token, LooksRare, and DYDX:

#PeckShieldAlert @Arthur_0x ’s hot wallet appears to be compromised. ~59 #NFTs was transferred to https://t.co/MZXIWN4ING , including ~5 #CloneX, ~17 $Azuki @AzukiZen, ~2 @TabinekoKIKI, ~2 @HedgiesOfficial, ~33 @SecondSelfNFT
~19 stolen NFTs wiped for ~233 $ETH (~$690k). pic.twitter.com/oqM08ex1Yg

— PeckShieldAlert (@PeckShieldAlert) March 22, 2022

https://etherscan.io/address/0xe47e8cd58c8e95f765e642d7dcb898f622cefa83#tokentxns

Stolen funds were transferred out to some external wallet:
https://etherscan.io/tx/0x1dc3c31aa91475c10e89cfb4b03e7a6715fe8018369a52f04d1505e345441207

The hacker is still holding stolen funds at the moment of writing.

This story reminds us of the benefits of using hardware wallets. Hardware wallets are built to be resistant to hacking. Even when a hardware wallet is hooked into your computer or linked through Bluetooth, the funds saved on the drive are difficult, if not impossible, to steal. While theoretically connected to the internet, transactions are signed “in-device” and then broadcast to the network via your computer’s internet connection. This “signature” allows you to transfer ownership of a transaction to the receiver. Because your private keys never leave the device, even if malicious spyware on your computer tried to steal your funds by fraudulently “signing” a transaction begun in your hardware wallet, the transaction would fail because the signature was incorrect.

As always, stay safe and DYOR!

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