Kraken vs CertiK: White Hat Operation Sparks $3 Million Controversy Amid Crypto Community
Summary:
The ongoing dispute between Kraken cryptocurrency exchange and security provider CertiK continues, revolving around a white hat operation, where CertiK allegedly siphoned nearly $3 million from Kraken accounts. While Kraken claimed that the total amount wasn't given back, CertiK asserted all funds were returned. CertiK got criticized and confronted by the crypto community for their suspicious actions and their use of the OFAC–sanctioned tool, Tornado Cash. The majority of the community backed Kraken while raising accusations of theft against CertiK. The situation is currently under law enforcement investigation.
The ongoing controversy between Kraken, a leading cryptocurrency exchange, and security provider CertiK, known as the Kraken CertiK episode, continues to unfold. Kraken asserts that the security company conducted a white hat operation on selected Kraken accounts and stealthily extracted nearly $3 million, which, according to Kraken, hasn’t been fully reimbursed. In contrast, CertiK espouses that it returned the total amount according to its records.
CertiK, on June 20, went public with their version of events, stating they reimbursed Kraken with 734.19215 Ether (ETH), 29,001 USDT, and 1021.1 Monero (XMR). However, Kraken claims it was owed 155818.4468 Polygon (MATIC), 907400.1803 USDT, 475.5557871 ETH, and 1089.794737 XMR.
Kraken's claims of fraudulent activity began on June 9 when a so-called security investigator alerted the exchange to a potential bug in their system that could potentially amplify user account balances. Kraken, responding promptly, corrected the glitch and identified three accounts that gained advantage from it, collectively withdrawing about $3 million from the company's accounts.
One of the three accused accounts was Know Your Customer (KYC) verified and used the bug to credit their account with $4. According to Kraken's Chief Security Officer, Nick Percoco, this should have served as sufficient evidence to expose the bug, claim the reward, and rectify the issue. However, the flaw was allegedly shared with two other accounts within a short span, collectively pocketing $3 million from the exchange. When asked to return the funds and collect their reward after presenting necessary onchain proofs, the anonymous “security investigator” purportedly declined and demanded the reward upfront.
It was later revealed that CertiK, a well-known security company, was behind the operation. The company asserted that their employee who found the loophole was coerced to return the funds without providing any wallet address. Ronghui Gu, co-founder of CertiK, conveyed that the agreement they reached during their meeting didn’t last.
Certik alleged to have transferred the high-valued funds to Tornado Cash as a security measure to avoid freezing from cryptocurrency exchanges. This move sparked criticisms from the crypto community, leading them to question CertiK’s intentions.
Moreover, the crypto community confronted CertiK over their suspicious actions of moving massive funds when a single transaction could have indicated the flaw. The use of Tornado Cash, an OFAC–sanctioned tool, was also questioned, hinting towards potential legal complications for CertiK.
Mostly, the crypto community has expressed support to Kraken, condemning CertiK for their insensitivity. Accusations of theft and subsequent threats to Kraken for the bounty have been rife. Cointelegraph has been informed that Kraken is liaising with law enforcement regarding the matter.
Both Kraken and CertiK's comments on the issue will be included in future updates of this article.
Published At
6/20/2024 12:33:28 PM
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