Stars Arena, a decentralized social media platform running on Avalanche, suffered a security breach that resulted in losses of $3 million on October 6. The next day, the platform announced it had received funding to cover the stolen amount and would proceed with relaunching after completing a full security audit.
Stars Arena went live in late September on Avalanche C-Chain, a component designed for running smart contracts on Avalanche. Stars Arena’s post-launch popularity led to increased activity on the Avalanche network, with trading volume rising by 248 percent in the 24 hours before the attack.
On October 7, an X user warned about a questionable movement of Avalanche (AVAX) tokens from Stars Arena, just a day after the platform announced that they had fixed a loophole that could have led to a loss of over $1 million.
This was later confirmed by the protocol’s staff, who apologized and communicated that there had been a major security breach in its smart contract. They asked users not to deposit funds while they investigated the security breach.
Following the news, AVAX prices decreased from $11.56 to $10.78, with users advising one another to remove Stars Arena from their X accounts.
PeckShield, a blockchain security company, announced that about $3 million in AVAX had been siphoned off the decentralized social media app. Another blockchain security company, SlowMist, tracked the hacker’s movement and found that the funds had gone to the FixedFloat crypto exchange.
The Stars Arena team addressed the breach in an X Spaces session on October 7. They emphasized that they would take time to ensure their platform’s security is “watertight” before relaunching. Although they did not mention the exact time, the team said it would happen “very soon” and with “all the funds in full.”
The team also confirmed they had secured the resources to mitigate the attack. Additionally, a dedicated white-hat development squad would conduct a total security audit and prevent future breaches.
With numerous breaches and exploits in the third quarter of 2023, security concerns in the crypto space are growing rapidly. According to a quarterly report by blockchain security company Beosin, the losses in Q3 alone were bigger than Q1 and Q2 combined. Only $663 million was lost in Q1 and Q2, compared to $889.26 million in Q3.
Beosin reported that $540.1 million was lost to hacks, with 18 percent attributed to decentralized finances, like Mixin Network, which lost $200 million due to a compromise in its cloud service provider database.
Another report by blockchain security firm Immunefi shows that $685.51 million in assets were lost to malicious actors across 76 incidents in the third quarter of 2023, with cryptocurrency breaches accounting for 96 percent of the figure.
ImmuneFi CEO Mitchell Amador said that the high losses in Q3 were driven by large-scale attacks. “State-backed actors played a crucial role as they were allegedly behind several cases this quarter. Their particular focus on CeFi led to a sharp surge in losses within this sector,” he said.
Amador was referring to the North Korean hacker cell Lazarus Group, who was responsible for stealing $208,600,000 in Q3 alone, representing 30 percent of the quarter’s losses. The group is allegedly the perpetrator behind high-profile attacks on CoinEx, Alphapo, Stake and CoinsPaid.
While Immunefi found about $61,169,000 of stolen funds had been recovered, this number only makes up 8.9 percent of total Q3 losses.
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