First Conviction in Smart Contract Hack

Every week, ISMG rounds up cybersecurity incidents in digital assets. This week, sentencing in the first-ever conviction for hacking a smart contract, indictment in a million-dollar illicit mining, FTX executive’s sentencing, Railgun’s money-laundering defense and Uniswap’s Wells Notice.

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Every week, ISMG rounds up cybersecurity incidents in digital assets. This week, sentencing in the first-ever conviction for hacking a smart contract, indictment in a million-dollar illicit mining, FTX collapse inquiry, FTX CEO’s sentencing, Railgun’s money-laundering defense and Uniswap’s Wells Notice.

Former security engineer Shakeeb Ahmed received a three-year prison sentence for hacking two decentralized cryptocurrency exchanges, resulting in the theft of over $12 million worth of cryptocurrency. U.S. Attorney for the Southern District of New York Damian Williams said this was the first-ever conviction for hacking a smart contract. The 34-year-old in December pleaded guilty to the hacking charges, which included wire fraud and money laundering. The prosecutors had accused him of manipulating pricing data to generate fees and later laundering the stolen funds through crypto mixers. In addition to the prison sentence, Ahmed will forfeit $12.3 million and pay $5 million in restitution to the affected exchanges.

A Nebraska man stole $3.5 million worth of cloud computing services to mine just under a million dollars worth of cryptocurrency, federal prosecutors allege in a newly unsealed indictment. The man, Charles O. Parks III, faces six criminal counts including wire fraud and money laundering. Authorities arrested Parks on Saturday; he made an initial court appearance on Omaha on Tuesday, where he was released on bond. He faces up to 20 years of prison for wire fraud and money laundering charges if convicted.

Former FTX executive Ryan Salame will face sentencing in a New York court on May 28 instead of the originally scheduled date of May 1. He pleaded guilty in September to criminal charges of conspiring to make unlawful political contributions and conspiring to operate an unlicensed money-transmitting business. Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York will preside over Salame’s sentencing as he did with FTX founder Sam Bankman-Fried. The former CEO received a 25-year sentence. The Federal Bureau of Prisons records Bankman-Fried’s current location to still be at the Metropolitan Detention Center, Brooklyn – where he has asked to remain during his appeal of the conviction.

Privacy exchange Railgun has denied allegations that North Korean hackers use the platform for nefarious purposes, saying that the hacker groups are barred from accessing the Railgun system. Railgun says it implemented a “private proofs of innocence” system over a year ago to block North Korean bad actors. Railgun’s statement is in response to a Wu Blockchain post positioning Railgun as a Tornado Cash alternative, with the Lazarus Group hackers using the former to launder stolen assets. The FBI has previously said that North Korean cyber actors had laundered $60 million of stolen funds on Railgun in January last year.

Uniswap founder Hayden Adams said he received a Wells Notice from the U.S. Securities and Exchange Commission – a warning of impending legal action from federal regulators. Uniswap Labs is the entity behind its namesake decentralized finance protocol. Adams vowed on X – formerly Twitter – to conteset regulatory action, writing that “this fight will take years, may go all the way to the Supreme Court, and the future of financial technology and our industry hangs in the balance”.”

With reporting from Information Security Media Group’s David Perera in Washington, D.C.