Another Massive Crypto Hack
The cryptocurrency sector has once again been shaken by a large-scale hack. On February 21, 2025, Bybit, one of the largest crypto exchanges, reported that approximately $1.5 billion worth of Ethereum was stolen from one of its cold wallets. The CEO, Ben Zhou, assured users that all other funds remained secure and that the platform would continue operations without disruption. However, such assurances have become all too familiar in the crypto space, as high-profile hacks continue to occur, often with devastating consequences.
Can We Trust the Narrative?
Before making any accusations, it is crucial to remember that one must never falsely blame individuals or companies without clear evidence. However, history has shown that some exchange hacks are not always the result of external attacks but rather internal fraud or collusion. The case of Sam Bankman-Fried (FTX) remains one of the most notorious examples, where a CEO actively misused customer funds, leading to a catastrophic collapse. Other infamous cases include:
- Mt. Gox (2014): Around 850,000 BTC were lost, with allegations of internal fraud.
- QuadrigaCX (2018): The CEO mysteriously died, allegedly taking access to millions in funds with him.
- Bitfinex (2016): Over 120,000 BTC were stolen, with concerns about insider involvement.
Given this troubling history, how can we be sure that Bybit is not experiencing a similar internal scandal? Many exchanges have been hacked over the years, including Binance, KuCoin, and Crypto.com. Despite improved security measures, breaches continue to occur. How can this keep happening?
Who Had Access to the Cold Wallet?
Bybit claims that “unknown” hackers managed to access a cold wallet — an offline storage method meant to be immune to external attacks. But how did these attackers gain access? Cold wallets require physical access or knowledge of their security credentials. Did someone leak the private key or seed phrase? If so, who?
It is virtually impossible to rule out internal involvement in such cases. Unlike traditional bank fraud, where detailed audit trails exist, cryptocurrency transactions are irreversible and pseudonymous. Investigators often struggle to find definitive proof of whether a breach was truly an external attack or an inside job.
The Challenges of Tracing Crypto Fraud
The very nature of cryptocurrencies makes it difficult to recover stolen funds. Hackers can swap stolen assets for other tokens or use Bitcoin mixers like Tornado Cash to obscure transaction trails. Once funds pass through enough layers of obfuscation, they become nearly impossible to track. Even blockchain analysis firms struggle to provide certainty in cases where sophisticated laundering techniques are used. If the stolen funds from Bybit go through similar processes, law enforcement agencies may never be able to retrieve them.
How Can Such Fraud Be Prevented?
The continued occurrence of exchange hacks raises the question: What can be done to prevent such incidents? Some potential solutions include:
- Multi-Signature Authentication: Requiring multiple, independent parties to approve any withdrawal from a cold wallet.
- Stronger Internal Audits: Regular and external security checks to ensure private keys remain protected.
- Better Insurance Policies: Exchanges should provide coverage for potential hacks to compensate affected users.
- Enhanced Transparency: Public proof-of-reserves and audits could increase trust in exchanges.
A Word of Caution
To be clear, this is not an accusation against Bybit or its leadership. However, given the history of the crypto industry, skepticism is justified. Users should always exercise caution and not store large amounts of assets on exchanges. Whether Bybit was truly hacked or something more sinister is at play remains to be seen — but one thing is certain: the crypto sector must do better to protect users from repeated disasters.
