Deribit Hackers Turns to Tornado Cash to Launder Stolen Funds

The hacker who exploited the Deribit exchange’s hot wallet has started moving the stolen funds using the sanctioned cryptocurrency mixer Tornado Cash.


According to data from Etherscan, the attacker has sent a total of 1,610 ETH since the exploit amounting to a sum of $2.54 million per the current price of Ethereum pegged at $1,577.84, according to data from CoinMarketCap.


Blockchain security outfit PeckShield was the first to spot the transfers being done as of Saturday with a total of $350,000 moved at the time. According to the Etherscan data, the balance on the hacker’s address is pegged at 7,501.37 ETH, with substantially more funds to launder.

Attempts to trace the funds have now been complicated by the involvement of Tornado Cash. The crypto mixing protocol receives funds, splits them into several units, and cryptographically sends them to unrelated addresses in a manner where the source of the funds can be obfuscated. 

The role Tornado Cash plays in the laundering of stolen funds such as this accounts for why the United States Treasury Department’s Office of Foreign Assets Control (OFAC) has banned the protocol. The regulator alleged that about $7 billion have been processed through the protocol thus far with a significant sum linked to the cybercrime syndicate Lazarus Group from North Korea.

Despite the protests from the crypto industry, the ban on Tornado Cash has been upheld, however, it has not stopped the Deribit exploiter from taking advantage of the shield it provides.

Since Blockchain.News reported the exchange’s $28 million exploit earlier this month, the protocol has taken several initiatives beyond the halting of transactions. The exchange said it has routed its transactions to Foreblocks for its robust security services, advising its users to open new Bitcoin (BTC) and supported altcoin addresses on Fireblocks to continually access its products and services.

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Deribit Exchange Says its Hot Wallet Was Hacked for $28M

Deribit Exchange has announced that it suffered an exploit on its hot wallet in the late hours of Tuesday, putting the trading platform amongst the list of crypto projects that have suffered a similar fate this year.


Taking to its official Twitter account, to announce the sad event, the exchange said though the quoted loss is true, that its users will not be affected as it will cover up the loss from its deep reserve.

“Deribit hot wallet compromised, but client funds are safe and loss is covered by company reserves. Our hot wallet was hacked for USD 28m earlier this evening just before midnight UTC on 1 November 2022,” the exchange’s tweet reads.

Deribit said besides the hot wallet, no other of its controlled wallets with Fireblocks or other cold storage was impacted. It noted that it has made it a matter of policy to safeguard 99% of its user’s funds in cold storage to reduce the potential impacts of these events.

Deribit is one of the biggest players in the Derivatives world, currently ranked in the 8th position according to data from CoinMarketCap. The exchange said in a bid to perfect its security systems, it had to pause major activities on its platform including withdrawals on its “third-party custodians Copper Clearloop and Cobo until we are confident all is safe to re-open.”

The exchange detailed that it has increased the number of confirmations necessary for deposits and that already initiated deposits will be credited to all user’s accounts after the required number of confirmations.

Exchanges have been a very fertile ground for hackers this year who extend their disturbing activities beyond centralized trading platforms to their Decentralized counterparts. From the hack of to that of Nomad Protocol, the trend has become a menace, calling for a security-focused solution to end this current onslaught across the board

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Strong Bitcoin and stocks rally position bulls for victory in Friday’s $860M options expiry

Bitcoin (BTC) bulls have good reason to celebrate the 22% gain in the past week. The price is pushing toward $46,000 and to the surprise of many, the $43,000 level held steady despite the volatility caused by the United States inflation data released on Feb.10.

There have been mixed feelings on the macroeconomic side. For example, retail sales in the Eurozone disappointed on Feb. 4 when the figure showed a 2.0% year-on-year growth versus the 5.1% expectation. while the United States nonfarm payroll abruptly showed a 467,000 jobs increase.

Investors are clearly increasingly concerned about corporate earnings despite the stronger than expected China and U.S. economic growth. In the past few weeks some big names took a hit, including Meta (FB), Delivery Hero (DHER-DE), and Paypal (PYPL).

Today’s 7.5% yearly U.S. consumer price index growth will likely reinforce the Federal Reserve’s expectations of at least two interest rate hikes throughout 2022 and not many investors can seek protection in treasuries because the 5-year Treasury yield currently stands at 1.9%.

Bitcoin is still a risky asset, but its price is discounted

Considering that the S&P 500 is only 5% shy of its all-time high, Bitcoin’s recent strength should not come as a surprise. Curiously, put (sell) option instruments dominate the Feb. 11 options expiry, but bears were caught by surprise after Bitcoin price stabilized above $43,000 this week.

Bitcoin options aggregate open interest for Feb. 11. Source: CoinGlass

A broader view using the call-to-put ratio shows a 14% advantage to Bitcoin bears because the $400 million call (buy) instruments have a smaller open interest versus the $460 million put (sell) options. However, the 0.86 call-to-put indicator is deceptive because most bearish bets will become worthless.

For example, if Bitcoin’s price remains above $44,000 at 8:00 am UTC on Feb. 11, only $55 million worth of those put (sell) options will be available. That effect happens because there is no value in the right to sell Bitcoin at $40,000 if it’s trading above that level.

Bulls are aiming for a $300 million profit

Below are the three most likely scenarios based on the current price action. The number of options contracts available on Feb. 11 for bulls (call) and bear (put) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $42,000 and $44,000: 4,550 calls vs. 1,750 puts. The net result is $120 million favoring the call (bull) instruments.
  • Between $44,000 and $46,000: 6,380 calls vs. 860 puts. The net result favors bulls by $250 million.
  • Between $46,000 and $48,000: 7,860 calls vs. 50 puts. The net result favors the call (bull) instruments by $350 million.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a call option, effectively gaining a negative exposure to Bitcoin above a specific price. But unfortunately, there’s no easy way to estimate this effect.

Related: Exchange stablecoin reserve hits $27B as Bitcoin rises toward $50K ‘fair value’

Bears best case scenario remains unkind

Bitcoin bulls need a small pump above $46,000 to score a $350 million profit on Feb. 11. On the other hand, bears’ best case scenario requires a 4% price drop from the current $45,600 to reduce their loss to $120 million.

Bitcoin bears currently have no reason to add short positions, considering the recent weak corporate data numbers. Therefore, bulls should continue to display strength by pushing the price to $46,000 or higher during Friday’s options expiry.

A $350 million profit might be just what’s needed for bulls to regain confidence and re-open long leverage futures, causing further upward pressure.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.