- A former security engineer has been arrested for defrauding a Solana-based DEX.
- This marks the first criminal case involving a smart contract exploit.
- This case will have significant precedents for future cases.
In a groundbreaking development, a former security engineer has been arrested for defrauding a decentralized exchange (DEX) operating on the Solana blockchain.
This marks the first criminal case involving a smart contract attack, shedding light on the potential vulnerabilities within the rapidly growing DeFi sector.
Security Engineer Apprehended
On Tuesday, July 11, 2023, Shakeeb Ahmed, a former security engineer for an international technology firm, was arrested in New York. The arrest was in relation to allegedly exploiting a smart contract bug to steal $9 million from a Solana-based DEX.
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Following the arrest, the United States Attorney for the Southern District of New York, Damian Williams, announced the first-ever criminal case involving an attack on a smart contract operated by a DEX. The prosecutors are charging Ahmed for wire fraud and money laundering related to the attack in July 2022.
Ahmed allegedly exploited a vulnerability in the DEX’s smart contracts to generate inflated fees with flash loans, which he then withdrew and laundered through a series of complex transfers on the blockchain.
He swapped cryptocurrencies, hopped across different crypto blockchains, and used overseas crypto exchanges to hide his tracks. However, he failed to cover his tracks, leading to his arrest.
On the Flipside
- Crypto scams have been on a downward trend in 2023, dropping by 75% in the year’s first half. In that period, total losses to hacks, scams, and rug pulls amounted to $655.61 million.
- Crypto scams make up just a minority of all financial fraud. According to the Federal Trade Commission, consumers reported $8.8 billion in losses due to fraud in 2022.
Why You Should Care
The Solana DEX case is the first of its kind and will provide a legal precedent for the future of DeFi. This case is also a stark reminder of the potential risks and vulnerabilities in the DeFi sector.
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