Analysts say the unknown perpetrator behind the KuCoin hack is selling the stolen ERC-20 tokens on Uniswap. The sale of tokens at the decentralized Ethereum-based exchange allows the hacker to access Ether (ETH), but this does not mean that they are washed.
All transactions made through the Ethereum block chain network are traceable using block chain explorers. So even if the tokens were converted to ether, the stolen funds would still leave traces. This also means that the exchange can (and probably will) block addresses associated with the contaminated funds.
Ether 1-day chart. Source: TradingView.com
Selling traced funds worth several million US dollars immediately after a hack is risky. All major stock exchanges are on alert. In this particular case, Tether (USDT) has frozen the funds related to the KuCoin hack.
As Cointelegraph reported earlier, Bitfinex and Tethers technology manager Paolo Ardoino said Tether had frozen USDT 33 million. However, Ardoino stressed in another statement that there are strict guidelines that must be followed to freeze funds. He explained:
There are two situations where Tether can go ahead and freeze funds: – Prosecution/regulatory demands – funds are sent to unrecoverable addresses (at Tethers discretion). This option does not entitle crypto users to engage in stupid scams or be less vigilant.
Since Tether actively tracks the funds and large stock exchanges, such as Binance and Bybit, have been contacted by KuCoin, it has become increasingly difficult to get rid of them. KuCoin CEO Johnny Lyu commented
We are in contact and working on the case with many large crypto exchanges such as Huobi, Binance, OKEx, BitMax and Bybit as well as block chain projects, security agencies and law enforcement agencies. Some effective measures have been taken and we will announce further details shortly.
The hacker sold the ERC-20 tokens to get into ETH. But the transactions and Ethereum addresses can be traced with Etherscan.
Since the large, decentralized exchanges do not have privacy solutions, the ERC-20 tokens leave traces for the exchanges to follow. This is why many analysts are rather relaxed. They do not believe that the sale of ether tokens will put pressure on the ether price.
Is Uniswap becoming a target for stolen coins?
According to Ardoino, the sale of the stolen ERC-20 tokens on a decentralized exchange like Uniswap has interesting implications.
He suspects that in the future, decentralized exchanges would implement data protection solutions, such as confidential transactions, to attract more users. Ardoino said: