An American cryptocurrency investor recently lost approximately $3.05 million worth of XRP due to the compromise of their Ellipal wallet. Blockchain researcher ZachXBT analyzed the on-chain data and revealed that the stolen funds were moved through bridges and eventually laundered via Huione-connected OTC channels.
Blockchain Records Reveal Theft Details
In a detailed post shared on October 19th, ZachXBT highlighted the events leading up to the theft that began on October 12th. He traced over 120 Ripple - Tron swaps and mapped out the address responsible for the attack. The funds were initially consolidated on the Tron network before being distributed to exchanges linked with Huione until October 15th.
U.S. authorities have accused Huione and its affiliated platforms, which are based in Southeast Asia, of facilitating extensive money laundering operations. The Treasury Department is preparing comprehensive sanctions against entities attached to this network, while FinCEN proposed a regulation identifying Cambodia-based Huione as a priority money laundering threat.
User Mistakes and Security Vulnerabilities
According to ZachXBT, the victim mistakenly believed their product was a hardware wallet, but it actually functioned as a hot wallet. The investigator pointed out that the user’s lack of experience and poor security choices enabled the wallet to be compromised. Similar attacks throughout the year underscore that user errors remain the weakest link, regardless of the technology involved. TRM Labs reported that over $2 billion in cryptocurrencies were stolen via private key thefts and wallet attacks in the first half of this year.
Following the incident, the likelihood of recovering the funds was considered low. Delayed reporting and international jurisdictional challenges complicate recovery efforts. ZachXBT emphasized the need for centralized exchanges and stablecoin issuers to develop stricter control mechanisms to prevent laundering through OTC channels.
XRP, used for swift value transfers on the Ripple network, experienced a 3.26% increase in the last 24 hours, trading at 2.46 at the time of the report.