Phishing Scam Ensnares NFT Marketplace, Stealing More Than $500 Million

  • By Patrick Ryan
  • Jul 14, 2022

A North Korean hacker obtained access to the systems of Axie Infinity, an NFT marketplace, and blockchain gaming service. The attack resulted in a loss of about $540 million. The hack of Axie Infinity is significant as it is a popular site for millions of individuals who trade NFTs and other collectibles from video games. Below, we provide some details of the digital aggression, highlighting how hackers performed the attack and how to prevent these attacks in other businesses.

Who is Responsible for the Attack?

Digital security specialists believe the miscreants responsible for the phishing scheme are in cahoots with a foreign government. If early predictions are correct, Axie is working in tandem with groups connected to the North Korean government.

When was the Hack Announced?

The initial report of the attack stems from The Block. The publication ran a story about the attack on March 23. The story details how hackers obtained control of several private keys linked to validator nodes belonging to Axie's Ronin Network. Axie DAO, a decentralized group that provides ongoing support, owns another node.

What is the Purpose of Private Keys and Validator Nodes?

Private keys are important in digital security as they are analogous to passwords. Many describe these keys as number strings used within the cryptography of blockchains. Validator nodes work in unison as connected computers that maintain the overarching blockchain through validating and processing information, including crypto transactions. All in all, nine such validators provide support for the Ronin Network. Therefore, it merely takes control over five validators for a digital aggressor to obtain control of the network.

The Axie system centered on only a couple of validators, an uncharacteristic strategy of public blockchains yet quite common on those of the permission variety. The concentration of the validators in a single space proved to be the issue as opposed to an insufficient number of validators. Add in the fact that the validators did not have proper distribution across independent organizations, and there was even more opportunity for an aggressor to wreak havoc.

Once the threat actors established majority control, they stole millions of dollars of cryptocurrency, including Ethereum. The wallet address tied to the attack was linked to the Lazarus Group of North Korea one month later in a United States Treasury Department statement. However, it is unclear how the threat actors established validator control in the first place.

What is the Role of Social Engineering in the Attack?

It appears that the hackers conducted social engineering in this attack using a malevolent offer of employment. Sources indicate job openings listed on the web set the stage for the transmission of spyware by way of a downloaded PDF. The PDF download allowed hackers to access Ronin IT and steal the validators.

A single employee notifying the Axie digital security team of the malicious email could have prevented the loss of hundreds of millions of dollars. The right IT personnel combined with the industry’s latest digital security protections facilitate identifying and removing digital threats before they cause significant damage.

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