Ex-Security Engineer Jailed For Hacking Decentralized Cryptocurrency Exchanges

Ahmed exploited a vulnerability in a decentralized cryptocurrency exchange’s smart contract by injecting fabricated pricing data, which triggered the generation of inflated fees totaling $9 million, which he subsequently withdrew in cryptocurrency. 

Following the theft, Ahmed attempted to extort the exchange, proposing the return of a portion of the stolen funds ($7.5 million) on the condition that they refrain from involving law enforcement. 

He exploited a vulnerability in Nirvana Finance’s smart contracts to buy cryptocurrency at a significantly discounted price and then resold it back to Nirvana at market value, draining $3.6 million—almost all their funds. 

To hide the stolen funds, he employed various laundering techniques by converting the stolen crypto into different tokens (token-swap transactions) and then “bridged” these funds from the Solana blockchain to the Ethereum blockchain, essentially moving them across different networks. 

At last, he converted everything to Monero, a privacy-focused cryptocurrency, and used anonymous exchanges and mixers to further obfuscate the trail.

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Knowledge of Blockchain Security

Capitalizing on his in-depth knowledge of blockchain security, AHMED, a US citizen and senior security engineer at a prominent international technology company, carried out successful cyberattacks against two cryptocurrency exchanges. 

His professional background in reverse engineering smart contracts, which involves analyzing and understanding their code to identify potential weaknesses, and blockchain auditing, a process focused on ensuring the security of blockchain transactions, provided him with the perfect toolkit for exploiting vulnerabilities within the exchanges’ smart contracts. 

The vulnerabilities, which stemmed from flaws in the code governing the exchanges’ operations, allowed AHMED to manipulate data for his own gain and by executing these sophisticated attacks, he was able to steal over $12 million in cryptocurrency.

A New York resident, Ahmed (34), received a three-year prison sentence and three years of supervised release for exploiting vulnerabilities in cryptocurrency exchanges.

The court further mandated the forfeiture of $12.3 million and an undisclosed amount of cryptocurrency. 

He is liable for over $5 million in restitution for the compromised exchanges and Homeland Security Investigations and the Internal Revenue Service’s Criminal Investigation Unit were commended for their contributions to the case.  

According to the Justice Government, Shakeeb Ahmed, a former security engineer, was sentenced to 3 years in prison for hacking two decentralized cryptocurrency exchanges (DEXs) in a first-ever conviction for a smart contract hack. 

He used his expertise in reverse engineering and blockchain audits to exploit vulnerabilities in the smart contracts and was also ordered to forfeit $12.3 million and a significant amount of cryptocurrency, along with $5 million in restitution to the affected DEXs. 

The case highlights the collaborative effort between the Illicit Finance and Money Laundering Unit and the Complex Frauds and Cybercrime Unit to address cryptocurrency-related cybercrime. 

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