Axie Infinity Founder Loses Almost $10 Million in Personal Crypto Wallet Hack

Jeff “Jihoz” Zirlin, co-founder of blockchain gaming leader Axie Infinity and its Ronin sidechain network, disclosed his personal crypto wallets were hacked on February 23rd. The breach resulted in the theft of approximately $9.7 million worth of ether.

TLDR

• Axie Infinity co-founder Jeff Zirlin had two personal crypto wallets hacked, resulting in the theft of $9.7 million worth of ether.
• The hack was limited to Zirlin’s personal accounts and unrelated to Axie Infinity or Ronin Network operations per Zirlin.
• Blockchain investigator PeckShield reported the hacker stole 3,248 ETH from a “whale wallet” and moved the funds through crypto mixer Tornado Cash.
• The wallet compromise enabled the unauthorized transfer of Zirlin’s funds, though exact details of how access was obtained are unclear.
• Crypto hacks/scams fell 28% in 2023 but still amounted to $2.6 billion in losses, underscoring persistent security threats.

Zirlin confirmed via Twitter that two of his wallet addresses were compromised, enabling the unauthorized transfer of funds by a still unidentified party. He was quick to assure that Axie Infinity, Ronin, and its operator Sky Mavis were unrelated to the security incident.

This has been a tough morning for me. 

Two of my addresses have been compromised.

The attack is limited to my personal accounts, and has nothing to do with validation or operations of the Ronin chain.

Additionally, the leaked keys have nothing to do with Sky Mavis operations.…

— Jihoz.ron ???? (@Jihoz_Axie) February 23, 2024

“The attack is limited to my personal accounts and has nothing to do with validation or operations of the Ronin chain,” Zirlin tweeted. He expressed confidence that strict security practices remain enforced for the companies’ activities.

Nonetheless, the wallet hack represented a serious personal loss. Blockchain investigator PeckShield tracked the movements of the stolen funds, reporting that 3,248 ETH was initially drained from a whale-sized wallet on Ronin Bridge containing Zirlin’s holdings.

#PeckShieldAlert It appears a whale wallet has been compromised, & ~3,248 $ETH (worth ~$9.7m) from the #Ronin Bridge was withdrawn and transferred to #TornadoCash pic.twitter.com/sRK36BQFDu

— PeckShieldAlert (@PeckShieldAlert) February 23, 2024

The ether was then split into different wallets before ultimately being funneled through Tornado Cash, a crypto mixer obscuring transaction sources. The use of Tornado Cash signaled an intention to anonymize and cash out proceeds of the theft, posing challenges for recovery and law enforcement tracing efforts.

While disconcerting, the incident comes amidst an overall decline in hacking activity plaguing the crypto industry. According to PeckShield, documented hacks, scams, and exploits decreased 28% year-over-year in 2023. However, $2.6 billion in losses still occurred, underscoring persisting security gaps, especially around DeFi protocols.

Cryptocurrency custodial practices remain fraught with risks, even for industry veterans. But Zirlin exhibited resilience in response to the personal misfortune, tweeting his resolve to continue building despite the setback.

The experience highlights the ever-present threats in digital asset management and the damage possible from a single wallet vulnerability.