Crypto puzzle: someone stole $11M worth of Trade.io coins from a cold wallet

Guys held their TIO coins in a cold wallet, which in turn was kept in a safety deposit box in a bank that was not compromised. And yet, bad guys managed to hack the wallet and run away with the loot of 50M TIO coins worth of $7.5 million ($11 million at the time of the hack attack). This puzzling incident can become a good idea for a detective story, however, neither Trade.io team nor TIO coin holders are impressed with the plot because it has happened for real.

Read more about types of wallets

The hackers transferred a small portion of coins to cryptocurrency exchanges  Kucoin and Bancor before the company ordered to freeze TIO trading on those platforms. Following the incident, Bancor delisted TIO and announced that it would no longer be traded at the platform. Kucoin suspended TIO trading.

"We alerted both Bancor & Kucoin accordingly to disable any deposits & withdrawals and did the same on trade.io. TIO Deposits & Withdrawals will be disabled on both Kucoin & trade.io until further notice, and TIO will no longer be listed on Bancor. Additionally, TIO trading has been disabled on the trade.io exchange until further notice," the company said in an official press release on the subject matter."

The stolen funds belonged to the company itself and were meant as a liquidity pool, which is used to back up trades. Trade.io is a decentralized multi-asset exchange that offers trading in fiat currency, digital assets, and derivatives based on physical commodities. The exchange was launched into operation in July 2018, following pre-ICO round where the company raised $51M against planned $135M.

Trade.io claimed that it "was an extremely isolated and contained incident."

"This was an extremely isolated and contained incident, limited to individual actors with access at the point of installation on a single hardware unit. Client funds, the exchange, our service, is not under threat from hackers."

Now the team is contemplating various options including hard fork that will make the stolen funds useless. This can happen only if all users agree to switch to the updated software. 

Read more about cryptocurrency forks

"It’s obvious that trade.io is now a major focal point of competitors and those attempting to destroy the movement that is on the ground floor, and we guarantee you we will not bow down to their actions. We have the strongest community in crypto and we assure you we will wind up stronger as a result of actions like these and any such attacks in the future."

This incident emphasizes one the most urgent problems of the cryptocurrency industry that hampers its development and discourage institutional adoption. While custodian services offered by various large players including Fidelity Investments is a big step forward for the industry, they will cure it of innate vulnerability to hack attacks.