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Attacks on crypto platforms have become common in 2018. The latest victim is an Israeli start-up, Bancor, which calls itself a “liquidity network” for cryptocurrencies.

The platform that lets users convert cryptocurrencies directly from their wallets suffered a security breach on Monday, July 9. Tokens worth $23.5 million have reportedly been stolen during the attack. The company has repeatedly mentioned that user accounts were not compromised during the event. Its platform is currently down as the team is working on investigating the case.

What Happened to Bancor?

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On Monday, the company tweeted to its 72k+ followers to inform them of a breach in security.

The tweet read:

“This morning (CEST) Bancor experienced a security breach. No user wallets were compromised. To complete the investigation, we have moved to maintenance and will be releasing a more detailed report shortly. We look forward to being back online as soon as possible.”

The company did not comment further, but its website went down for maintenance soon after. A few hours later, Bancor posted a statement on Twitter, detailing the event.

The company stated that a wallet used for upgrading smart contracts was compromised. The attacker then used this for extracting Ethereum from BNT smart contracts. The attacker stole 24,984 ETH (worth approximately $12.5 million); 229,356,645 NPXS (about $1 million); and 3,200,000 BNT (around $10 million).

Bancor was able to identify the theft and freeze the BNT tokens, limiting damage to its own coins using the Bancor Protocol. However, it is not possible for the company to freeze Ethereum and Pundi X tokens. The company further states that it is in touch with dozens of other crypto exchanges to identify where the thief is trying to sell those coins and stop him from liquidating the stolen assets.

Users Assured of Zero Loss of Funds

Bancor repeatedly mentioned on its Twitter profile that user funds are safe. However, this didn’t stop prices from falling on Monday. The Bancor token is down by 15.53 percent, while Pundi X tokens fell by 12.22 percent. Ethereum, on the other hand, fell by 4.73 percent, per CoinMarketCap.

Bancor launched its initial coin offering (ICO) last year, raising 396,720 Ethereum tokens, worth over $153 million ($183 million by today’s price). Billionaire Tim Draper was one of the backers of this currency. However, soon after the ICO, the price of the tokens fell by 56 percent, making it one of the worst performing tokens among the crowdfunding sales of the year.

The co-director of Cornell University’s Initiative for Cryptocurrencies and Smart Contracts, Emin Gun Sirer, said that Bancor’s formula of converting one crypto token to another is less efficient than manual market making.

Multicoin Capital’s Kyle Samani went a step further to say:

“For assets that actually have value, there will be a market. For assets that people don’t want to buy… why should there be some pity-based programmatic market maker to provide liquidity? My inner capitalist is just dumbfounded by the concept of Bancor.”

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