Hack Track: Nexus Mutual Founder’s Wallet

Who was hacked?

Hugh Karp, the founder of DeFi insurance protocol Nexus Mutual, experienced an attack at 9:40 am (GMT) on December 14 that resulted in a loss of more than $8 million.

What was stolen and when?

Nexus Mutual announced the news via a Twitter post on Monday (December 14), saying that Karp’s personal wallet address was attacked and drained by a member of the protocol. The address contained 370,000 NXM (Nexus Mutual) tokens, currently worth about $8.25 million.

How did the hack take place?

Speaking to an online portal, The block, Karp said that the attackers tricked him into approving a transaction and then gained access to his computer, and altered his MetaMask extension. “Then when I was performing an unrelated transaction, MetaMask popped up with a spoof transaction, and I subsequently approved it, thinking it was the transaction I was intending to conduct. Instead, it was transferring NXM to their wallet,” said Karp. Nexus Mutual is unaffected and nobody else is impacted, he said. “My private keys are still secure. The attacker didn’t get access to them. They tricked me into signing a spoof transaction,” added Karp.

What is the impact of the hack on the firm’s clients?

According to a tweet from the Nexus Mutual official handle, the attacker completed KYC eleven days ago and then switched membership to a new address on Friday, December 3rd. The Nexus Mutual is not impacted; the pool of funds and all systems of the firm are safe.

 

Where are the stolen funds going?

• The hacker took control of Hugh Karp’s personal ETH wallet through a proxy transaction and managed to transfer 370,000 NXM tokens to his personal address, let’s call that ‘E1’ (more details on all transactions and addresses are available in the next section under the fund movement analysis heading).
• The hacker then converted the stolen 370,000 NXM tokens to WNXM tokens and sent all the WNXM tokens to another address, let’s name it ‘E2’.
• The tokens were further moved from E2 to two addresses, let’s call them ‘E3’ and ‘E4’ respectively.
• After a series of transactions between E2, E3, and E4, the hacker converted the tokens from E2 to approximately 742.75 WETH and sent 100 WETH to address E3 and 10,954 WNXM tokens to address E4.
• Multiple smart contract transactions were carried out from E2 and E3 to convert WNXM tokens to WETH and TetherUSD tokens.
• The hacker then swapped a portion of the WNXM tokens to approximately 137 renBTC and in-turn converted the renBTC to BTC.
• The BTC was then directly distributed among 5 different bitcoin addresses.

Ethereum fund movement analysis

On 14th of December 2020, 370,000 NXM tokens were stolen from Hugh Karp’s ETH wallet address and were deposited to the hacker’s Address ‘E1’ (as highlighted in the graph below) through the transaction ID 0x4ddcc21c6de13b3cf472c8d4cdafd80593e0fc286c67ea144a76dbeddb7f3629.

These 370,000 NXM tokens were then converted into wrapped NXM tokens which were then sent to 0x03E89F2e1EbCEa5d94c1B530f638cEA3950c2E2b, hereby referred to as E2.

 

After a series of back and forth transactions between E3 and E4, the hacker executed as many as 27 transactions with smart contracts from address E2 to convert the WNXM (wrapped) tokens into 742.75 wrapped ETH.

 

 

Of this, 742.75 WETH, approximately 100 WETH tokens were then sent to the address E3, along with 97,992 WNXM tokens and 10,954 WNXM tokens to address E4 from E2. 50,000 WNXM tokens were sent from address E3 to address E4. The hacker then proceeded to convert some of the leftover WNXM tokens to 137.188 renBTC.

 

The address E4 currently has approximately 60,954 WNXM tokens and these funds have not been moved further.

Funds have been moved around addresses E2, E3, and E4 on multiple occasions in addition to numerous smart contract transactions to convert the WNXM tokens to wrapped ETH, TetherUSD tokens, and renBTC.

Bitcoin fund movement analysis

The hacker has a total of 5 BTC addresses which is used to move the stolen funds, the details of which are as follows (‘H’s are confirmed hacker addresses and ‘A’s are suspected hacker addresses, refer to the table below for addresses and their respective tags given in the graphs):

 

• The hacker’s address referred to here as H1 received a total of 0.45 BTC from another address referred to as A1 on November 21, 2020. This transaction was done before the hack and does not seem to be related to the breach.
• On December 15, 2020, the hacker sent 0.45 BTC to another address referred to here as H4.
• In another transaction, $28 worth of BTC (0.0014) was sent to address A2.

 

• Hacker’s address referred to here as H2 received 46.09 BTC from suspected hacker’s address A3 on December 15, 2020.
• The hacker then sent 45.94 BTC to another address H4 on December 15, 2020, and 0.14 BTC to A2.

 

• Hacker’s address H3 received 75.84 BTC from A3 on December 15. The majority of 75.64 BTC was then sent to another hacker’s address H4.
• 0.24 BTC was later sent to address A2.

 

• Hacker’s address H4 received 121.99 BTC from addresses H1, H2, and H3 in 3 different transactions on December 15.
• Further on December 16,122, BTC was transferred to 2 addresses 91.99 BTC to A4 and 30 BTC to A5.
• Out of the 122 BTC from H4, 50 BTC were sent to A6 and 41.99 BTC to A7.

 

• The hacker’s address H5 has received 15.10 BTC from A3 on 15 December 2020. The funds haven’t moved from this address as of 16 December 2020.

 

• As of 16 December 2020, the funds have moved to different addresses and sit in addresses A3, A5, A6, and A7. (refer above for address details).

What can be done to prevent hackers from cashing out?

All exchanges that are receiving funds from Hugh Karp’s wallet can freeze the account of the user associated with the incoming transaction (flagged by a blockchain analysis tool), preventing them from trading one currency for other cryptocurrencies, especially anonymous ones, that could then be transferred elsewhere and are more difficult to trace.

Merkle Science has updated wallet addresses associated with Hugh Karp’s wallet. All our partners and customers will also receive immediate information if any funds they receive are from the hackers’ wallet.

Most exchanges globally share information on stolen fund addresses to deal with such risks and collaborate with law enforcement agencies and blockchain analysis firms such as Merkle Science for additional data and investigative services.