The Owner of Axie Estimates That Recovering Stolen Cryptocurrency Could Take Two Years

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The Owner of Axie Estimates That Recovering Stolen Cryptocurrency Could Take Two Years

The Owner of Axie Estimates That Recovering Stolen Cryptocurrency Could Take Two Years
Axie Infinity, a NFT-based online video game. Photographer: Alejandro Cegarra/Bloomberg
Source: Bloomberg
1649506802 09 Apr / 12:20

The creator of the famous play-to-earn Axie Infinity crypto game stated that it intends to retrieve at least a fraction of the about $600 million in cryptocurrency stolen by hackers from a game-related software system, but acknowledged that the process may be lengthy.

"What we are assuming over the next two years is that some funds will be recovered," Aleksander Leonard Larsen, chief operating officer of Sky Mavis in Ho Chi Minh, said in an interview on Thursday. "Two years for Axie is an appropriate amount of time for us to gather further information. We're in it for the long haul."

Sky Mavis is collaborating with law enforcement authorities to seek and recover the tokens – primarily Ether – that were siphoned stolen by hackers in late March through a blockchain "bridge" that let users to move cryptocurrency into and out of the virtual world, Larsen said. He declined to disclose any information on the probe.

According to Rishav Rai, head investigator at Merkle Science, which specializes in crypto crime, monies taken in massive crypto thefts are “very unlikely” to be entirely recovered. Simultaneously, once a significant hack is uncovered, it becomes harder for the criminals to sell their windfall.

Apart from soliciting capital from investors to compensate players who have lost money, Sky Mavis will also take a $450 million damage to its financial sheet to guarantee that all stolen cryptocurrency is restored.

The stolen Ether tokens were placed into Ethereum wallets, and a portion of the loot was subsequently transferred to Tornado Cash, a service that assists users in concealing transactions. Tornado’s technique disassociates the source and recipient addresses on Ethereum blockchain transactions.

Crypto mixers such as Tornado are not normally designed to manage such amounts, and transferring the tokens between exchanges and wallets “is not only costly, but also time-consuming, not to mention exceedingly noticeable,” Rai stated March 30.

The hackers got access to five machines known as validator “nodes,” which enabled them to drain 173,600 Ether and 25.5 million USDC tokens via software known as the Ronin Bridge – a total value of around $600 million at current pricing. To begin, they used a so-called social engineering attempt against a Sky Mavis employee, Larsen claimed.

“That person got access to our nodes through attacking one person on the team,” he explained without providing details. “The Ronin network’s core technology remains secure.” The corporation has stated that it has no reason to believe the breach was carried out by an insider.

Sky Mavis has already begun compensating players who suffered financial losses as a result of the assault. This week, it secured $150 million in a fundraising round headed by Binance Holding Ltd. to pay user reimbursements. Larsen said the transaction was completed within 48 hours and declined to elaborate on the valuation.

Sky Mavis is also using $450 million of its own funds to make up the gap and entirely refill the coins drained in the breach, Larsen added. The company’s financial position is stable, he noted. It now holds around $1.5 billion in cryptocurrencies in Axie Infinity’s treasury, which is used to store fees collected from players for purchasing and minting the game’s blob-like NFT characters. It will not use treasury cash to compensate participants.

Additionally, Sky Mavis reached an arrangement with Binance that enables gamers to deposit and withdraw cryptocurrency while the Ronin Bridge is suspended. To improve defenses against future assaults, the needed number of validators to sign off on bridge withdrawals has been increased to 21.

Even before to the attack, Axie Infinity was losing users. According to data from the week ended March 28, a day before the theft was discovered, the number had fallen around 45 percent from a November high of 1.48 million. Larsen ascribed this partly to a precipitous decline in the value of the game’s awards, which he claimed dissuaded players who engaged only for the purpose of earning money.

“This incident will plague us for a long time in the future, no doubt,” he remarked. “We feel like we failed to live up to the expectations of our users and we need to rebuild the trust. But I just think this is more as a lesson learned, and security needs will be a priority moving forward.”

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