DeFiance Capital founder loses $1.6 million in hot wallet hack

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The founder of major crypto investment firm DeFiance Capital, “Arthur_0x,” has suffered a hack on one of his hot wallets, resulting in a loss of more than $1.6 million in non-fungible tokens (NFTs) and crypto.

In a huge show of support, the crypto community has come to his aid to retrieve the stolen items as he has asked people to do blacklist the hacker’s wallet. Several people on Twitter have attempted to determine exactly how the hack took place and where the hacker gained access to their wallets.

NFT Community member “Cirrus” even went so far as to purchase two of the stolen Azuki NFTs and decided to return them to Arthur at cost. Cirrus told Cointelegraph today that he:

“I found out they were hacked and instead of selling them for a profit like the other people who got something from him, I decided to sell them back to him at cost to help him out.”

Cirrus added that this was “not the first time” this had happened to him. He said, “I could easily sell them for 6-8 ETH gains, but it just isn’t right.” His profile says he’s been the victim of carpet pulls three times before, which likely guided his sympathies for his fellow victim.

A rug pull occurs when a crypto or NFT project suddenly shuts down and the value of its token or NFT plummets without warning. In most cases, rug pulls are confirmations of a scam.

In all, Arthur seems to have lost 78 different NFTs from five collections, mostly Azukis. He also lost 68 Wrapped Ether (WETH), 4,349 Staked DYDX (stkDYDX) and 1,578 LooksRare (LOOKS) tokens. The hacker started moving assets around 00:30 UTC and then immediately made all NFTs available on OpenSea’s NFT marketplace. At the time of writing the hacker wallet held 545 ETH valued at approximately $1.6 million.

This hack underscores the importance of operational security when dealing with self-custody of crypto assets, as even individuals in the highest echelons of the industry can be targeted. In Arthur’s case, he’s baffled at how this happened to him, as he tweeted: “Hot wallet on mobile actually isn’t secure enough.”

Had Arthur used a hardware wallet, also known as a cold wallet, he still might not have been protected from this attack. Unlike a hot wallet, a hardware wallet is not always connected to the network. This feature can protect one’s private key and seed phrase from intruders. However Arthur believes The security breach stems from an on-chain transaction he made that may have also compromised a hardware wallet’s seed phrase or private key.

Related: The NeoNexus founder is pulling the plug on the popular Metaverse NFT project

NFT and Crypto fraud is always a danger, therefore investors should take the highest safety precautions with their assets. There are even serial scammers designing projects Benefit from the NFT community and pull off the carpet and then move on to the next scam. As Cirrus pointed out:

“This is a gold rush for hackers, and they’re doing everything they can to find new ways to take advantage of it.”

Faced with frustration and anger at the hack, Arthur had stern words for the party that stole his fortune, stating in a tweet“The only thing I can tell the hacker is: You’re messing with the wrong person.”