$1 250 000 USD

JULY 2020

GLOBAL

ELECTRUM

DESCRIPTION OF EVENTS

"Securing Bitcoin payments since 2011, Electrum is one of the most popular Bitcoin wallets. Electrum is fast, secure and easy to use. It suits the needs of a wide spectrum of users." "Electrum verifies that your transactions are in the Bitcoin blockchain. Because Bitcoin is not about trust, It is about freedom and independence." "Sign transactions from a computer that is always offline. Broadcast them from a machine that does not have your keys" "Be safe from malware. Use two-factor authentication by Electrum and Trustedcoin."

 

"Electrum is free software. Released under the MIT License. Anyone can run an Electrum server. No single entity controls the network." "Electrum has various user interfaces. It can be used on mobile, desktop or with the command line interface." "Electrum supports hardware wallets: Ledger, Trezor, Keepkey" "Split the permission to spend your bitcoins between several wallets."

 

"Electrum is a light client, which means it must connect to the blockchain through a server, which by default is chosen from a list of public Electrum servers. Anyone can operate such a public server and some users will be randomly connected to it."

 

"You can specify a specific server to connect to, but by default, it connects to a random peer. There are no "authorized servers". By design, they cannot interfere with bitcoin transactions made by clients except: 1) lie about account balances and 2) not relay a valid transaction to the rest of the network. The problem here is it's messaging capability that communicates directly with it's connected clients. There is no authenticity of any messages created by any statum servers - only what the manager of that server wants to say."

 

"Electrum, a wallet service like Blockchain.com, has been plagued with several phishing attacks. The issues have dated back to 2018, with accounts confirming that hackers had stolen almost $1 million in cryptocurrencies from users."

 

"The hacker setup a whole bunch of malicious servers. If someone's Electrum Wallet connected to one of those servers, and tried to send a BTC transaction, they would see an official-looking message telling them to update their Electrum Wallet, along with a scam URL."

 

"Hello. I had a similar situation 2 months ago. 36.5 Bitcoin was stolen from my address."

 

"The user claimed someone pilfered 36.5 BTC from one of their wallet addresses. The BTC reportedly ended up spread across five different addresses."

 

"Some of the stolen Bitcoin went to Binance, but they ignore my appeals and do not return. Cover up fraudsters."

Electrum was a highly popular wallet software for bitcoin. Since Electrum operates in a decentralized manner, anyone can set up a node. On older versions of the client, if a user connects to a node and tries to make a transaction, the node may report an error, typically a string which is passed through from the bitcoind software. To assist with usability, formatted text is allowed as output.

 

Users of the Electrum wallet came under an elaborate phishing attack. Malicious operators set up a large number of Electrum nodes across a diverse range of IP addresses. When users would connect to these nodes and attempt to send a transaction, they would receive back an error message that informed them of the need to upgrade their Electrum wallet to "v3.4.1", which had an "important security update" that "provides a fix for a transaction deserialization vulnerability". The update was available from the open source "electrum-project" Github repository, which beared a striking resemblance to the official Electrum Github repository.

 

The message was grammatically correct and the link went to a legitimate Github repository on the Github website. Users who failed to carefully check the exact URL of the Github repository or carefully review the repository ownership would have been convinced they were installing a legitimate update to their Electrum wallet. It appears that the update made the private key of any wallets available to the attackers, who could then spend freely from their new-found coins.

 

Over $1m USD worth of bitcoin was successfully taken from Cryptbtcaly. There is no evidence that any of these funds were ever recovered.

HOW COULD THIS HAVE BEEN PREVENTED?

Always bookmark the official links of every service which you use. Never download an update from any other location, even if prompted within the software. If you suspect that the official website of a service has changed, check with friends or post online to see if the link is moved.

 

Whenever you complete a wallet upgrade or install a new wallet software, always try the new setup first with a smaller wallet and amount. It is recommended to keep the vast majority of funds fully offline in a cold storage wallet with no keys ever stored online.

 

Check Our Framework For Safe Secure Exchange Platforms

Sources And Further Reading

 For questions or enquiries, email info@quadrigainitiative.com.

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