DOJ Arrests Senior Security Engineer For Stealing Over $9 Million In Crypto

Key Points:

• Senior security engineer arrested for $9 million cryptocurrency fraud on a decentralized exchange, according to the DOJ.
• Exploited smart contract vulnerability to obtain inflated fees and user funds.
• Law enforcement tracks and recovers stolen cryptocurrency, showcasing commitment to combating fraud.

A former security engineer was detained on Tuesday morning in connection with the first criminal case involving an assault on a smart contract maintained by a decentralized exchange, according to DOJ.

Shakeeb Ahmed, 34, was charged with wire fraud and money laundering after the United States Attorney’s Office for the Southern District of New York said he cheated an undisclosed decentralized cryptocurrency exchange, taking around $9 million in cryptocurrency.

“In July 2022, Ahmed carried out an attack on the Crypto Exchange by exploiting a vulnerability in one of the Crypto Exchange’s smart contracts and inserting fake pricing data to fraudulently cause that smart contract to generate approximately $9 million dollars’ worth of inflated fees that Ahmed did not legitimately earn, which fees Ahmed was able to withdraw from the Crypto Exchange in the form of cryptocurrency,” according to a DOJ press release.

According to the DOJ, the disputed DEX runs on the Solana blockchain. Ahmed reportedly took out tens of millions of dollars in flash loans, put them in the DEX’s liquidity pool, withdrew the cash, and claimed a big percentage as fees. According to a copy of the indictment, he took out at least twenty-one flash loans.

According to the indictment, after stealing the cash, Ahmed spoke with the Crypto Exchange, proposing to restore all of the stolen assets, except $1.5 million, in exchange for the attack not being disclosed to law authorities. Yet, the inquiry continued, eventually resulting in Ahmed’s imprisonment.

Although the DOJ did not specifically identify the DEX, the description fits the theft from Crema Finance, a Solana-based Exchange, last year. In July, the attacker stole more than $9 million from the DEX, returning around $8 million while keeping about $1.7 million.

United States Attorney Damian Williams underlined the necessity of uncovering fraudulent actions inside the crypto and digital asset ecosystem. Williams declared:

“This is the second case we are announcing this week to shed light on fraud in the cryptocurrency and digital asset ecosystem.”

Williams emphasized Ahmed’s position as a security engineer, revealing that Ahmed’s skill was critical in carrying out the assault, utilizing his understanding of reverse engineering smart contracts and blockchain audits.

The DOJ said Ahmed then attempted to launder the assets by converting them into multiple cryptocurrencies, transferring them across blockchains, changing into Monero (XMR), and sending them via several crypto exchanges.

As the case progresses, this big step serves as a sharp reminder of the continuous efforts to prevent crypto fraud. The trial’s verdict will very certainly have ramifications for future investigations involving decentralized system assaults and the unlawful usage of crypto.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.