Crypto Fraud Down 70% in Q1 2023: Remarkable Shift


We have seen a notable change in the way crypto-hackers behave, with the number of attacks decreasing and the number of stolen funds being returned. In the first quarter of the year 2023, crypto attacks fell by a staggering 70% compared to the same period of the last year, according to a recent report from blockchain intelligence firm – TRM Labs. Besides, victims are recovering almost half of the stolen funds, as hackers are increasingly settling for ‘white hat’ rewards from misused projects. This shift in Crypto hacking patterns indicates an increasing emphasis on ethical practices and highlights the influence of increased regulatory attention and high-profile enforcement cases in the cryptocurrency sector.

Cryptocurrency landscape and Crypto hacking risks

Cryptocurrency is a digital or virtual currency which uses cryptography to protect financial transactions. It control the creation of new units and verify the transfer of assets. In recent years, both investors and hackers have become increasingly interested in these decentralised digital assets.

Hackers have targeted various platforms and projects to exploit vulnerabilities and steal funds. Cryptocurrency hacks have been a persistent concern within the industry. But a recent report from blockchain intelligence company TRM Labs reveals a notable shift in cryptohacking activity.

Fall in cryptohacking and return of funds by hackers

A significant decrease in crypto hacks and an encouraging trend of hackers returning stolen funds was seen in the first quarter of 2023. According to TRM Labs, a blockchain intelligence firm, hackers have stolen approximately $400 million from crypto projects in the first three months of 2023, across 40 attacks. That’s down 70% from the same period in 2022, though.

Decrease in crypto hacking and average hack size in Q1 2023

The decline in usual hack size along with the decline in the number of crypto hacks is a positive aspect. According to TRM Labs, the average hack size in the first quarter of the year 2023 was $10.5 million, compared to $30 million in the year 2022. This reduction is an indication of a positive trend towards smaller-scale attacks.

Growing trend of hackers returning stolen funds for white hat rewards

An interesting development is the increasing trend of hackers returning stolen funds in exchange for white hat rewards from the exploited projects. Hackers voluntarily returned some of the stolen funds in exchange for a white hat reward in several cases during Q1 2023. For instance, a hacker exploiting TenderFi returned half of $1.6 million stolen and was rewarded with $850,000. Likewise, the attacker behind the Euler Lending Protocol exploit agreed to return all the $200 million in crypto stolen. These returns demonstrate a shift towards more ethical hacking methods.

Factors affecting the return of stolen funds

The increase in the return of stolen funds by hackers is due to a number of factors. One key factor is the growing regulatory focus on crypto hacks and scams. Exchanges have tightened their KYC and AML policies to prevent hackers from cashing in stolen coins undetected. In addition, the avenues for cashing out stolen cryptocurrencies have been limited by US sanctions on Tornado Cash and ETH-mixing protocols. This have led to the blacklisting of associated funds on regulated exchanges. In addition, it has become more difficult for hackers to unload their ill-gotten gains due to high-profile enforcement cases and public tracking of stolen funds.

Mango Market Protocol and the Avraham Eisenberg case

The arrest of Avraham Eisenberg in December is a notable enforcement case. Eisenberg was the first known person arrested for a decentralised finance exploit. He publicly admitted to exploiting the Mango Markets protocol that revealed a vulnerability and prompted action. Cases like this act as warning signs for potential hackers. This can contribute to an increase in the return of stolen funds.

Hackers returning stolen funds Q1 2023

There have been notable cases of hackers returning stolen funds in Q1 2023. The intruder that unlocked the Safemoon protocol gave back $7.1million of the stolen crypto and kept the rest of the $9million haul. These cases of returning stolen funds show a growing willingness among hackers to behave ethically and cooperate with victimised projects.

Historical examples of the return of stolen funds by DeFi hackers

There is nothing entirely new about this trend of hackers returning stolen funds. In previous cases, DeFi hackers have also chosen to return stolen funds. For example, the Defrost Finance and Nomad Bridge hackers in 2022, the Poly Network hackers in 2021 and the dForce hackers in 2020. These cases highlight the evolving landscape of ethical hacking practices in cryptocurrency.

March 2023 Estimated Toll of Hacks and Fraud

As reported by Crystal Blockchain, the estimated toll of hacks and scams of crypto market in March 2023 was $119 million. This downward trend in both the number and average size of hacks is proves that the cryptoscape is becoming safer.