Liquid Hack: A Targeted API Attack in August 2021
The Liquid Hack in August 2021 was a targeted attack that exploited a vulnerability in the exchange’s API, leading to the theft of $97 million in cryptocurrency. This breach highlighted significant security risks for crypto platforms and prompted a major overhaul of Liquid’s security measures.
- Background: Liquid’s significance in Asia.
- The Hack: Compromised API led to $97 million stolen.
- Who Was Responsible: Suspected Lazarus Group involvement.
- Impact: Security overhaul by Liquid.
Liquid’s Significance in Asia
Liquid is a prominent cryptocurrency exchange, particularly significant in the Asian market. Established in 2014, it has become a key player in the digital asset world, offering services ranging from spot trading to derivatives and lending. Its platform has attracted millions of users due to its reliability and global reach, making it a popular choice for crypto enthusiasts in Asia. In August 2021, a sophisticated attack tested Liquid’s reputation and stole a staggering $97 million.
The Hack: Compromised API Led to $97 Million Stolen
In August 2021, Liquid became the target of a major security breach that saw cybercriminals steal a total of $97 million from its exchange. The hack involved a vulnerability in Liquid’s API (Application Programming Interface), which allowed hackers to bypass security measures and gain unauthorised access to the exchange’s hot wallets.
The attackers exploited weaknesses in the API to make off with large amounts of cryptocurrency from Liquid’s platform. This type of attack is particularly dangerous as it targets the technical backbone of a platform rather than relying on conventional social engineering methods or phishing. The hack was rapid and devastating, with the stolen funds consisting of a variety of cryptocurrencies, including Bitcoin, Ethereum, and several ERC-20 tokens.
Who Was Responsible: Suspected Lazarus Group Involvement
Although no group officially claimed responsibility for the attack, many cybersecurity experts pointed to the Lazarus Group, a notorious cybercrime group believed to have North Korean backing. The group has a history of launching highly sophisticated attacks, often targeting cryptocurrency exchanges for financial gain.
The Lazarus Group has previously carried out major cyberattacks, including the infamous 2017 WannaCry ransomware attack and the 2019 hack of South Korean exchanges. Their signature tactics, such as exploiting vulnerabilities in APIs and using complex techniques to launder stolen funds, fit the patterns seen in the Liquid hack.
The Impact: Security Overhaul by Liquid
The breach had a profound impact on Liquid, prompting the exchange to carry out a complete security overhaul. Following the hack, Liquid suspended deposits and withdrawals on its platform while investigating the breach. The exchange worked with law enforcement and cybersecurity experts to trace the stolen funds and improve its security posture.
Liquid’s response included:
- Enhanced API security: The platform introduced stronger API security measures, including two-factor authentication (2FA) for all API keys.
- Cold storage solutions: The exchange increased its use of cold storage wallets to ensure that a significant portion of funds remained offline and out of reach of potential attackers.
- Increased monitoring: Liquid implemented more robust monitoring systems to detect any suspicious activities on the platform in real-time.
- Bug bounty programmes: The exchange also ramped up its bug bounty programme to encourage external security researchers to find vulnerabilities before attackers could exploit them.
Lessons Learned: API Security Best Practices
The Liquid hack served as a critical reminder of the importance of securing API endpoints. APIs are integral to cryptocurrency exchanges, providing communication between the platform and external services. However, they also present a vulnerability point that can be exploited by attackers.
The key lessons learned from the hack are:
- API Access Control: Strict access controls should be in place to limit who can interact with an exchange’s API. This includes using unique, time-limited API keys and enforcing strong authentication practices such as 2FA.
- Use of Cold Storage: Keeping the majority of funds in cold storage wallets reduces the risk of losing funds in the event of a hack. Keep only a small portion of funds in hot wallets for trading purposes.
- Real-Time Monitoring: Continuous monitoring and logging of API activity can help identify suspicious behaviour early on, allowing exchanges to respond swiftly before attackers can cause significant damage.
- Security Audits and Penetration Testing: Regularly testing systems with security audits and penetration tests helps identify and patch vulnerabilities before attackers can exploit them.
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Glossary of Terms
API (Application Programming Interface)
A set of tools that allow different software applications to communicate with each other.
Cold Storage
A method of storing cryptocurrency offline, away from the internet, to protect it from hacking attempts.
Hot Wallet
A cryptocurrency wallet connected to the internet and used for daily transactions.
Lazarus Group
A hacker group linked to North Korea, responsible for various high-profile cyberattacks, including those targeting cryptocurrency exchanges.
Bug Bounty Programme
A programme offered by companies to reward individuals for identifying and reporting vulnerabilities in their systems.
Liquid Hack – Quiz: Answer the following questions in 2-3 sentences each.
- What vulnerability was exploited in the Liquid hack?
- How did the Lazarus Group’s involvement impact the investigation?
- What security measures did Liquid implement after the hack?
- Why are cold wallets more secure than hot wallets?
- How can API security be strengthened to prevent attacks like the Liquid hack?
- What role does real-time monitoring play in preventing cyberattacks?
- Why is it important to limit API key access?
- What is a bug bounty programme, and how does it help security?
- How did the Liquid hack affect the cryptocurrency community’s trust in exchanges?
- What are some best practices for securing crypto assets?
Quiz Answer Key:
- A compromised API was exploited by the attackers to gain access to the exchange’s hot wallets.
- The Lazarus Group’s involvement was suspected due to their history of targeting exchanges and using similar methods.
- Liquid increased API security, moved funds into cold storage, and enhanced monitoring systems.
- Cold wallets store crypto offline, making them less susceptible to hacks.
- Using strong authentication, limiting access, and enforcing API key permissions are essential for API security.
- Real-time monitoring helps detect suspicious activity early and allows for a quick response to attacks.
- Limiting API key access prevents unauthorised users from exploiting vulnerabilities.
- A bug bounty programme incentivises researchers to find and report system vulnerabilities.
- The hack undermined trust, prompting exchanges to review and upgrade their security.
- Best practices include using cold storage, enabling 2FA, and conducting regular security audits.
