FBI Alerts Investors on the Increase in DeFi Attacks

As the Decentralized Finance (DeFi) space continues to suffer attacks from hackers, the US Federal Bureau of Investigation has issued a fresh warning against Defi platforms.

In the public announcement where the agency shared the warning, it said hackers exploit vulgarities in the smart contract that governs the platforms. According to the agency, hackers have deployed methods that include flash loan attacks, signature verification vulnerability, and manipulating crypto prices to exploit the vulnerability.

Citing data from Chainalysis, proceeds of crypto-related crimes in the Q1 of 2022 amounts to $1.3 billion of which about 97% is related to DeFi platforms.

The agency says cybercriminals feed on investors’ increased interest in cryptocurrencies and the complexity of functionality around the open source nature of DeFi platforms.

Although the FBI recognizes that there is a level of risk associated with all investments, the agency advises that Investors thoroughly investigate a DeFi platform before its use.

The agency recommends that DeFi platforms carry out independent audits on their protocol. This process usually entails an independent auditor carrying out a thorough analysis of a project’s underlying code. 

The review is aimed at identifying vulnerabilities or weaknesses that can negatively affect the platform

Furthermore, the agency advises that investors approach projects within a limited timeframe cautiously especially when it’s yet to conduct a code audit.

The FBI also urged investors to carry out their own research on DeFi platforms before investing in projects. In all, the agency request that investors targeted by attackers, contact the nearest local FBI office.

Increase in DeFi attacks

According to the Chainalysis data cited by the FBI, attacks on DeFi platforms have been on the increase compared to previous years. Attacks on DeFi platforms amounted to 30% in 2020 and 70% in 2021.

Another data from blockchain security firm Certik shows that over $1.6 billion have been exploited from the Defi space. This figure surpasses that of 2020 and 2021 put together.

After exploiting these platforms, attackers then use mixer apps like the now-sanctioned Tornado Cash to obfuscate the trail of their transactions. Alexey Pertserv, the developer of Tornado Cash, has since been arrested in the Netherlands. A recent ruling shows that the developer will stay in jail for 90 days while he awaits charges.

The US FBI warning trails related to warnings on the DeFi ecosystem by the Thai Securities and Exchange Commission (SEC).