VERITASEUM

DESCRIPTION OF EVENTS

"Veritaseum builds blockchain-based, peer-to-peer capital markets as software on a global scale. We enable the seamless connection of parties and assets without the need for a third or authoritarian interest." "Any entity with internet access can participate in these capital markets on a peer-to-peer and one-on-one basis."

"Despite very low scores which were published pre-ICO across the board on ICO tracker and scoring websites, Veritaseum raised $14.8 million in ETH from investors during their 2017 ICO and through subsequent efforts thereafter."

"In May 2017 Veritaseum completed an ICO, aiming to build a peer-to-peer platform for trading without the need for brokerages, traditional exchanges or banks. It is not known how much was raised in the ICO."

"But only one month later, in July 2017, the founder of Vertiaseum, Reggie Middleton, posted in the Veritaseum Slack group that hackers had stolen 36,000 VERI tokens at the time worth approximately USD$8.7M (USD$32.5M as at 1 January 2017)."

"After one user posted a screen capture of Veritaseum founder Reggie Middleton mentioning the hack on Slack, Middleton later confirmed the theft. There, he said the hackers "dumped" the tokens within a few hours and without the public knowing about the hack."

"Middleton claimed that the hackers defeated two factor authorisation on two different accounts and “fineggeled 3rd parties security (sic)”. The sale of the stolen VERI tokens for Ether caused a flash crash in the price of VERI and a substantial (USD$80 or so) drop in the price, which has only recovered in late 2017."

"If Middleton’s comments are true, then even with multiple security layers, the business was still exposed to a determined hack."

"The hack seemed to be very sophisticated, but there is at least one corporate partner that may have dropped the ball and be liable," Middleton said. "We'll let the lawyers sort that out, if it goes that far." Bleeping Computer reached out to the Veritaseum CEO, but Middleton declined to provide additional comment at this time.

"Veritaseum says hackers gained control of the phone belonging to Middleton in a SIM-swap attack – where a victim's phone number is transferred to another device."

"While there is no indication that the Vertiaseum hack was an inside job, it would be a very determined hacker to break through two factor authentication protocols."

"Based on the address of the hacker or hackers that Middleton located in his post, all the stolen tokens were exchanged on EtherDelta, a decentralized trading platform, of which 80 percent of the volume is in VERI. The exchange only supports the VERI to ETH trading pair." "According to the transaction time, nearly $8 million worth of VERI were traded to ETH, the consecutive large sell orders for which led to a major drop of VERI exchange price to ETH."

"The good news is that actual investors weren’t affected by the Ethereum theft. Instead, Middleton says that tokens were only stolen from him and his team, and not actual token buyers. When questioned on whether Veritaseum was being blasé about the theft, Middleton fired back."

“There are 100M tokens issued, the hackers stole about 37k. As I said, it is quite disconcerting, but it is not the end of the world,” said Middleton. “In the scheme of things, this is small. I am not downplaying the seriousness of the heist either, but I am looking at the heist for what it is. A company that we use was compromised, the vulnerability was closed, and we are investigating whether we should move against that company or not.”

"The SEC issued a press release recently outlining multiple fraud claims against Veritaseum and its founder and ‘financial guru’, Reginald Middleton. In the statement, they requested from the court an emergency freeze on Veritaseum’s remaining $8 million in assets."

"Additionally, the SEC charges that Veritaseum, led by Middleton, engaged in price manipulation on an unregulated exchange. Not only that, there are several instances where the SEC accused Middleton of moving investor assets into his personal account."

Veritaseum was launching a peer to peer exchange platform. Investors were able to purchase VERI tokens on the open market and as part of the ICO.

Some of these VERI tokens were stored in the wallet of Reggie Middleton, which was secured using SMS-based two factor authentication. The phone was SIM-swapped, and this was used to authorize the withdrawal of the tokens, which were promptly sold on the market.

HOW COULD THIS HAVE BEEN PREVENTED?

Company assets should be stored in multi-signature wallets with all keys in cold storage.

Check Our Framework For Safe Secure Exchange Platforms

$1B lost: the 5 biggest cryptocurrency fails of 2017 | Piper Alderman (Aug 10)
Veritaseum Price Drops after SEC Files Fraud Charges - HedgeTrade (Aug 23)
Veritaseum Founder Claims $8 Million in ICO Tokens Stolen (Sep 18)
Veritaseum Accuses T-Mobile of Gross Negligence Over $8.6M SIM-Swap Hack (Sep 18)
@ReggieMiddleton Twitter (Sep 18)
Hacker Steals $8.4 Million Worth of Ethereum From Veritaseum Platform (Sep 18)
Ethereum Made A Mockery As Veritaseum Wallet Hack Loses $8.4 Million To Theft | HotHardware (Sep 18)

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