Chainflip Bolsters Security to Block Bybit Hackers' Laundering

Chainflip, a cross-chain decentralized exchange (DEX), is preparing a protocol upgrade to prevent hackers responsible for the recent $1.4 billion Bybit hack from using its platform to launder stolen assets. The upgrade, version 1.7.10, introduces enhanced screening tools that allow broker operators to reject suspicious deposits of ETH and ERC-20 tokens.

The upgrade is a response to Chainflip's detection of Bybit hackers attempting to swap USDC through its platform on February 22. In response, Chainflip temporarily placed its front-end swapping service into maintenance mode to block further attempts. The Bybit hack, which occurred on February 21, is now considered the largest crypto heist in history, with hackers exploiting the exchange's multi-signature approval process.

The upcoming upgrade is expected to go live within 24 to 72 hours and will form a robust and permanent protection for liquidity providers (LPs) on the network. Chainflip Labs emphasized the importance of protecting LPs and regular users from illicit activities, stating that the platform will not be useful to anyone whose wallet can be linked to any major incident, hack, fraud, or scam.

The Bybit hack has resulted in the loss of a large portion of the exchange's Ethereum (ETH) reserves. Investigations have linked the attack to the Lazarus Group, North Korea's state-backed cybercrime organization. In the aftermath, Bybit CEO Ben Zhou announced that the exchange had replenished its ETH reserves through a combination of short-term loans, whale deposits, and ETH purchases.

Blockchain analytics firm EmberCN reported that the attackers laundered approximately 89,500 ETH (valued at $221.5 million) within just two and a half days after the hack—representing 18% of the total stolen ETH. EmberCN warned that the remaining 410,000 ETH could be exchanged for other assets, like BTC or DAI, within the next two weeks.

However, non-KYC exchange eXch has shown resistance to Bybit's requests to block stolen assets passed through its platform. In a shared email with the Bybit risk team, eXch expressed frustration over what it claims are previous incidents where Bybit allegedly froze funds belonging to its users without adequate explanation.