Cryptocurrency exchange Kraken has disclosed that a research team is withholding $3 million worth of digital assets after identifying and exploiting a security bug.
An anonymous individual, claiming to be a ‘security researcher,’ reported a critical vulnerability to Kraken on June 9. However, instead of simply reporting the bug, the researcher used two accounts to exploit it, withdrawing over $3 million in digital assets, according to Kraken’s Chief Security Officer, Nick Percoco.
Following the unauthorized withdrawal, the researcher demanded a reward for identifying the bug. Percoco detailed the situation in a June 19 post on X (formerly Twitter):
“Instead, they demanded a call with their business development team (i.e., their sales reps) and have not agreed to return any funds until we provide a speculated $ amount that this bug could have caused if they had not disclosed it. This is not white-hat hacking; it is extortion!”
Kraken clarified that the stolen cryptocurrency came from its treasury and that no user funds were at risk during the incident.
Summary Review: The situation underscores the challenges and complexities of the bug bounty programs in the cryptocurrency space. While ethical hackers play a crucial role in identifying vulnerabilities, this incident highlights the fine line between ethical hacking and extortion. Kraken’s experience serves as a cautionary tale for other exchanges and emphasizes the importance of clearly defined rules and agreements in bug bounty programs to prevent similar incidents in the future. The crypto community will be watching closely to see how Kraken resolves this issue and whether the stolen funds will be recovered.
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