TL;DR
- Massive Hack: Lazarus Group stole $1.5B in liquid-staked ETH from Bybit, laundering over $605M via THORChain.
- THORChain Backlash: A vote to block hack-linked transactions was overturned, prompting key resignations and validator threats.
- Growing Concerns: Record swap volumes and FBI warnings underscore rising regulatory and security challenges for decentralized protocols.
The cryptocurrency world is reeling from the recent hack of Bybit, which saw North Korea’s Lazarus Group steal approximately $1.5 billion worth of liquid-staked ETH. This incident marks the largest exploit in the industry’s history. The hackers have already laundered over $605 million worth of Ethereum, representing more than half of the stolen funds.
The majority of these funds were moved through THORChain, a decentralized cross-chain liquidity protocol, which has come under intense scrutiny for enabling the flow of illicit funds.
THORChain’s Controversial Vote
The fallout from the Bybit hack has led to internal turmoil within THORChain. A core developer, known as “Pluto,” announced their resignation following a controversial vote to block transactions linked to the Lazarus Group.
The vote, which aimed to halt Ethereum transactions on THORChain to prevent the laundering of stolen funds, was quickly overturned. This decision has sparked a backlash from the community and raised concerns about the protocol’s ability to prevent illicit activities.
Resignations and Threats
In addition to Pluto’s resignation, a THORChain validator known as “TCB” has threatened to step away from the protocol unless a solution is implemented to stop the flow of illicit funds.
TCB was one of the three validators who supported the vote to block the transactions, but the decision was reversed almost immediately. The controversy has highlighted the challenges faced by decentralized protocols in balancing security and decentralization.
Record-Breaking Volumes
Despite the controversy, THORChain has experienced a surge in activity, recording its highest-ever daily volume of $860 million in swaps on February 26, followed by $705 million the next day. The increased volumes have been driven by the movement of stolen funds, further complicating the situation for the protocol.
Regulatory and Security Concerns
The FBI has urged crypto validators and exchanges to take action against the Lazarus Group, effectively confirming North Korea’s involvement in the hack. The association of THORChain with such large amounts of stolen funds has raised concerns about potential regulatory intervention and national security issues.
THORChain’s founder, John-Paul Thorbjornsen, defended the protocol, stating that none of the wallet addresses sanctioned by the US Treasury’s Office of Foreign Assets Control interacted with THORChain.
