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Kraken Bitcoin Flash Crash to $100 CAD: Potential Hacker Activity

Summary

On June 2, 2019, Kraken, a respected cryptocurrency exchange, experienced a flash crash on its Bitcoin-to-Canadian Dollar (BTC/CAD) trading pair. In a matter of seconds, the price of BTC dropped from $11,200 CAD to just over $101 CAD, a decline of over 99%. The incident resulted in losses of approximately $10,470,000 USD, equivalent to 1,200 BTC. Analysts suggest that this event was executed by a hacker attempting to siphon funds from Kraken. The attacker is alleged to have executed the flash crash using a specific method. First, they managed to gain access to an account that held 1,200 BTC, but they were unable to withdraw the funds due to two-factor authentication. To maneuver around this, they set up their own buy orders, capping them at $100 CAD, on the BTC/CAD trading pair, which was not frequently traded. Then they sold off the entire 1,200 BTC into this illiquid market. As a result of this move, they effectively transferred the funds to themselves. Through this strategy, the attacker managed to become the legitimate owner of the 1,200 BTC, securing them at a price considerably below the prevailing market rates.

Attackers

The identity of the attacker remains unknown.

Losses

Kraken experienced losses of 1,200 BTC, worth around $10,470,000 USD at the time of the incident.

Timeline

Security Failure Causes

Market Manipulation: The attacker took advantage of the illiquid BTC/CAD pair on Kraken, which had a limited number of buy orders above $5,000 CAD. By placing low buy orders and dumping the compromised account’s BTC, the attacker was able to manipulate the market and transfer the funds to their own account.