On-chain messages between hacker and victim reveal a ransom standoff, with every demand etched permanently on the blockchain.
Last Friday, $2.8 million worth of (mostly dog-themed) crypto tokens were stolen from ShibaSwap, a “next generation decentralized exchange” for the Shiba Inu ecosystem.
Among the loot were approximately 250 billion KNINE tokens, from liquid staking protocol K9 Finance. K9 wants them back, and is willing to pay the hacker a bounty.
The tokens are ostensibly worth over $600,000 at current market prices. Though a simulated swap, through extremely thin liquidity, paints a rather different picture.
The hack was flagged by security firms Peckshield and Tikkala Security and involved using a “flash” loan to buy up enough tokens to achieve “majority validator power.”
Then, the hacker signed “a malicious state to drain assets from the bridge.”
They subsequently split up most of the stolen assets between various addresses but the stash of KNINE tokens, though, clearly not worth swapping, remains in their primary address.
Read more: Circle and Tether bug bounties aren’t enough says LlamaRisk
ShibaSwap hack negotiations begin
On Monday, an address labelled “k9dev.eth” reached out to their “Dear Shibarium Bridge Hacker” on-chain, offering a five-ether (ETH) “bounty to return stolen KNINE tokens.”
Presumably, the K9 team is very keen to avoid the hacker swapping such a large quantity of KNINE which would likely send its price to near zero.
The message also contains the address of a bounty contract to facilitate the exchange, piling on the pressure with the warning that the “bounty will start to decrease in seven days.”
Not one to be low-balled, however, the hacker has responded, “I can’t accept five ETH.”
They instead propose no less than 50 ETH (around $225,000), adding “let me know when you are willing to meet that price.”
The full exchange can be read via Etherscan’s input data message viewer, here.
The K9 team’s initial offer comes in at over $20,000, over 500 times the execution price on ShibaSwap itself. However, it’s just 3.6% of the purported value of the KNINE tokens.
Bounties offered by hacked crypto projects are typically set at 10% of the value stolen. Seemingly insulted by the initial offer, the hacker has called K9 Finance’s bluff and asked for over a third.
The price of KNINE took a sharp dive following the hack. Strangely, given the potential effects of the outcome of the on-chain negotiations, there haven’t been many large moves since.
Shiba Inu was one of the top-performing memecoins of crypto’s last bull cycle. It is currently down 85% from its all-time-high in October 2021, per CoinMarketCap data.
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Source: https://protos.com/on-chain-ransom-negotiations-show-shibaswap-hacker-wont-be-low-balled/
