The $1.5B Bybit Exploit: Inside the Largest Digital Hack of All Time

The Bybit hack has officially become the largest crypto heist in history, with over $1.5 billion stolen.

That’s roughly 16% of all previous crypto hacks combined.

This wasn’t just a technical exploit, it was a masterclass in social engineering that bypassed even the most robust security measures, including multisig setups and cold wallets.

Let’s break down what happened, how it happened, and what we can learn from this incident.

The exploit was a chilling reminder that even the most secure systems can be compromised if humans are manipulated.

Here’s the play-by-play:

1. Unusual Outflows Detected:

Blockchain sleuth ZachXBT first flagged unusual outflows from Bybit, totaling over $1.46 billion.

2. Sophisticated Fund Movement:

The attacker swapped mETH and stETH for ETH on decentralized exchanges and split 10,000 ETH across 48 different addresses to obfuscate the trail.

3. The Social Engineering Masterstroke:

The hacker didn’t exploit a smart contract vulnerability, they exploited humans.

Bybit’s multisig signers were tricked into approving a fraudulent transaction.

• The attacker presented a legitimate-looking UI from Safe, displaying the correct transaction details.
• Behind the scenes, the signers were actually approving a change to the smart contract logic of Bybit’s ETH cold wallet.
• This handed control of the cold wallet to the attacker.
   

4. The Likely Attack Path:

• The hacker identified every multisig signer.
• Infected their devices with malware.
• Manipulated the UI to display a different transaction than the one being signed.
• Got all signers to approve it without suspicion

The blame game is always tricky in these situations, but let’s break it down:

1. The Multisig Signers:

   The signers were the primary target of the attack. Despite seeing what appeared to be a legitimate transaction, they were tricked into approving a malicious change to the cold wallet’s logic.

2. The Safe Interface:

   While Safe’s official frontend wasn’t compromised, the attacker was able to mimic it convincingly enough to deceive the signers.

3. The Malware:

   The malware used to infect the signers’ devices played a critical role in manipulating the UI and hiding the true nature of the transaction.

4. The Human Factor:

   Ultimately, the weakest link in the chain was human vulnerability. No amount of technical security can fully protect against sophisticated social engineering.

Bybit is now in damage control mode. Here’s what they’re doing:

1. Tracing the Funds:

   The team is working to trace the stolen ETH. Since the funds were split across 48 addresses, recovery will be challenging but not impossible. They launched a bounty of 140M to trace & freeze funds.

2. Reassuring Users:

   Bybit claims they’re solvent and can cover the loss. They’ve assured users that all client assets are backed 1:1 and that withdrawals are operating normally.

3. Strengthening Security:

   This incident has been a wake-up call for Bybit. They’re likely reviewing their security protocols, especially around multisig approvals and cold wallet management.

The Bybit hack is a stark reminder of the risks in the crypto space.

Here are some key takeaways:

1. Multisigs Aren’t Foolproof:

   Even the most robust multisig setups can be bypassed if human signers are manipulated.

2. Cold Wallets Aren’t Automatically Safe:

   Social engineering can bypass even the best cold wallet setups.

3. Humans Are the Weakest Link:

   No matter how secure the code is, humans remain vulnerable to manipulation.

4. Supply Chain Attacks Are Evolving:

   Malware can manipulate trusted interfaces, making it harder to detect fraudulent transactions.

To prevent such attacks in the future, here are 10 actionable steps for securing wallets, whether they’re cold, warm, or hot:

1. Use Hardware Wallets with Screen Verification

• Always use hardware wallets (like Ledger or Trezor) that display transaction details on the device screen.
• Verify every transaction on the hardware wallet itself, not just the connected interface.

2. Implement Zero-Trust Security Models

• Assume every transaction request could be malicious.
• Require multiple layers of verification before approving any transaction.

3. Isolate Signing Devices

• Use dedicated devices for signing transactions, free from internet access or other software that could be compromised.

4. Regularly Update and Audit Wallets

• Keep wallet software and firmware up to date.
• Conduct regular security audits to identify vulnerabilities.

5. Use Multi-Factor Authentication (MFA)

• Require MFA for accessing wallet interfaces or approving transactions.
• Use physical security keys (like YubiKey) for added protection.

6. Educate and Train Signers

• Train multisig signers to recognize phishing attempts and social engineering tactics.
• Emphasize the importance of never signing a transaction they don’t fully understand.

7. Monitor for Unusual Activity

• Use blockchain analytics tools to monitor wallet activity in real-time.
• Set up alerts for large or unusual transactions.

8. Diversify Wallet Storage

• Spread funds across cold, warm, and hot wallets to minimize risk.
• Use cold wallets for long-term storage and hot wallets for smaller, operational funds

9. Verify Transaction Details Manually

• Always cross-check transaction details (e.g., recipient address, amount) on multiple trusted sources before signing.

10. Limit Wallet Permissions

• Restrict wallet permissions to only what’s necessary.
• Avoid granting overly broad access to smart contracts or external interfaces.

Choosing a reputable audit firm like QuillAudits means your protocol undergoes a multi-layered security review, combining deep manual inspection by expert auditors with AI-powered analysis.

With 7+ years of experience, 1,400+ audits completed, and $30B in assets secured, we specialize in uncovering critical vulnerabilities, from logic flaws to economic exploits, and providing actionable remediation strategies.

Our comprehensive approach ensures your project isn’t just audited but fortified against evolving threats, keeping security risks in check long before attackers find them.