Incident: Title: Axie Infinity Hack: $620 Million Crypto Theft via Social Engineering

Published Date: 2022-07-06

Postmortem Analysis
Timeline 1. The software failure incident, the hack on Axie Infinity, happened in March. 2. The article was published on July 6, 2022 [130301]. Therefore, the software failure incident occurred in March 2022.
System 1. Ronin blockchain system 2. Proof-of-Authority blockchain model 3. Validator nodes of the Ronin blockchain system [130301]
Responsible Organization 1. The hacker who exploited the Ronin blockchain to steal $620 million worth of crypto was responsible for causing the software failure incident [130301]. 2. Lazarus, a North Korea-backed outfit, was identified by the US government as being behind the heist [130301].
Impacted Organization 1. Axie Infinity game and its developer Sky Mavis were impacted by the software failure incident involving a hack that resulted in the theft of $620 million worth of cryptocurrency [130301].
Software Causes 1. The software cause of the failure incident was a hack that exploited the Ronin blockchain used by Axie Infinity, allowing hackers to steal $620 million worth of crypto [130301].
Non-software Causes 1. Social engineering through a fake job offer via LinkedIn, leading to the compromise of a senior Sky Mavis engineer [130301]. 2. Lack of proper validation and verification processes in the recruiting procedure, allowing the hacker to gain access to the network [130301]. 3. Inadequate employee training on recognizing and preventing phishing attacks, resulting in a compromised employee [130301].
Impacts 1. Loss of $620 million worth of cryptocurrency due to the hack on the Ronin blockchain used by Axie Infinity [130301]. 2. Decrease in the value of Axie NFTs and the game's Smooth Love Potion cryptocurrency following the hack [130301]. 3. Compromised security leading to the draining of Axie Infinity's treasury of $25 million in the USDC stablecoin and 173,600 ether [130301]. 4. Negative impact on player trust and confidence in the game's security and infrastructure [130301].
Preventions 1. Implementing stricter verification processes for job offers and recruitment to prevent social engineering attacks like the fake job offer used in the hack [130301]. 2. Enhancing employee training on recognizing and avoiding phishing schemes to prevent unauthorized access to IT infrastructure [130301]. 3. Increasing the number of validators on the Ronin blockchain to make it more difficult for bad actors to take control of the network [130301].
Fixes 1. Implementing stricter security measures to prevent phishing attacks and social engineering schemes, such as conducting thorough background checks on potential job offers and ensuring all documents are safe before opening them [130301]. 2. Enhancing network security by increasing the number of validators on the blockchain to make it more difficult for bad actors to take control [130301]. 3. Regularly updating and patching software vulnerabilities to prevent unauthorized access to critical systems [130301].
References 1. The Block [130301]

Software Taxonomy of Faults

Category Option Rationale
Recurring one_organization (a) The software failure incident related to a hack at Axie Infinity involving the exploitation of the Ronin blockchain has happened again within the same organization. The incident involved a hack that took place in March, where a hacker managed to exploit the Ronin blockchain to steal $620 million worth of crypto [130301]. This incident highlights a security breach within the organization that led to significant financial losses and the compromise of user funds. (b) There is no information in the provided article about a similar incident happening at other organizations or with their products and services.
Phase (Design/Operation) design, operation (a) The software failure incident related to the design phase can be attributed to the hack that took place in Axie Infinity due to a phishing scheme. The incident involved a fake job offer sent via PDF that was laced with spyware, allowing the hacker to control four of Ronin's nine validators and gain access to the community-run Axie DAO [130301]. (b) The software failure incident related to the operation phase can be linked to the compromise of a Sky Mavis employee through advanced spear-phishing attacks on various social channels. This compromised employee was used by the attacker to penetrate Sky Mavis IT infrastructure and gain access to the validator nodes, ultimately leading to the hack [130301].
Boundary (Internal/External) within_system, outside_system (a) within_system: The software failure incident in the Axie Infinity hack was primarily due to factors originating from within the system. The hack was achieved through a phishing scheme that targeted a senior Sky Mavis engineer within the company. The hacker exploited the Ronin blockchain, which is the blockchain used by Axie Infinity, by controlling validators within the network. This internal vulnerability allowed the hackers to access the community-run Axie DAO and drain Axie Infinity's treasury of millions of dollars in cryptocurrency [130301]. (b) outside_system: The hack on Axie Infinity, while executed through internal vulnerabilities, was also influenced by external factors. The US government attributed the hack to Lazarus, a North Korea-backed outfit. Additionally, the hack was socially engineered via a fake job offer sent to a Sky Mavis engineer through LinkedIn. This external interaction led to the introduction of spyware into the system, enabling the hackers to gain control over validators within the Ronin blockchain [130301].
Nature (Human/Non-human) non-human_actions, human_actions (a) The software failure incident in the Axie Infinity hack was primarily due to non-human actions. The hack was achieved through a phishing scheme where a fake job offer containing spyware was used to exploit the Ronin blockchain, allowing hackers to control validators and drain funds from Axie Infinity's treasury [130301]. (b) However, human actions also played a role in the software failure incident. The hack was socially engineered via a fake job offer sent to a senior Sky Mavis engineer through LinkedIn. The engineer was targeted by fake recruiters, leading to the compromise of the IT infrastructure and gaining access to validator nodes [130301].
Dimension (Hardware/Software) software (a) The software failure incident in the Axie Infinity hack was not directly attributed to hardware issues. The hack was primarily facilitated through social engineering via a fake job offer containing spyware in a PDF document, allowing the hacker to gain control over validators in the Ronin blockchain system used by Axie Infinity [130301]. (b) The software failure incident in the Axie Infinity hack was primarily due to contributing factors originating in software. The hack was achieved through a phishing scheme involving a fake job offer with spyware-laced PDF, allowing the hacker to control validators in the Ronin blockchain system [130301].
Objective (Malicious/Non-malicious) malicious (a) The software failure incident in this case was malicious. The hack on Axie Infinity's Ronin blockchain, which resulted in the theft of $620 million worth of cryptocurrency, was orchestrated by a hacker who exploited a phishing scheme involving a fake job offer to a senior Sky Mavis engineer. The hacker used spyware embedded in a PDF to gain control of four of Ronin's nine validators, ultimately draining Axie Infinity's treasury of $25 million in USDC stablecoin and 173,600 ether [130301].
Intent (Poor/Accidental Decisions) poor_decisions (a) The intent of the software failure incident was due to poor_decisions introduced by the hackers. The hack on Axie Infinity was achieved through a phishing scheme where a fake job offer was used to target a senior Sky Mavis engineer. The engineer was lured in by recruiters on LinkedIn, leading to the compromise of the company's IT infrastructure and gaining access to the validator nodes [130301].
Capability (Incompetence/Accidental) development_incompetence, accidental (a) The software failure incident in the Axie Infinity hack can be attributed to development incompetence. The hack was achieved through a phishing scheme where a fake job offer containing spyware was used to compromise the Sky Mavis engineer, leading to the control of four of Ronin's nine validators [130301]. This incident highlights the vulnerability introduced by human error or lack of professional competence in handling security measures within the development organization. (b) Additionally, the incident can also be categorized as accidental as the hack was socially engineered via a fake job offer, indicating that the contributing factors were introduced accidentally through the recruitment process involving spyware-laced PDFs [130301].
Duration permanent, temporary (a) The software failure incident in this case was permanent. The hack that took place in March on the Ronin blockchain used by Axie Infinity resulted in the theft of $620 million worth of crypto. The hackers exploited the network by controlling four of the nine validators and gaining access to the community-run Axie DAO, allowing them to drain Axie Infinity's treasury of $25 million in the USDC stablecoin and 173,600 ether. The total stolen amount, after ether's price drop, is now worth $229 million. This incident led to significant financial losses and security breaches for Axie Infinity, indicating a permanent impact on the platform [130301]. (b) The software failure incident could also be considered temporary in the sense that measures were taken post-incident to address the vulnerabilities and enhance security. Following the hack, Sky Mavis, the developer of Axie Infinity, took steps to reimburse players who lost crypto in the hack and increased the number of validators on the Ronin blockchain from nine to eleven to improve security. These actions suggest that while the initial impact of the hack was severe, efforts were made to mitigate future risks and enhance the platform's security, indicating a temporary phase of vulnerability that was addressed [130301].
Behaviour crash, omission, value, other (a) crash: The software failure incident in the article can be categorized as a crash. The hack on the Ronin blockchain led to a situation where the hackers were able to control a significant portion of the validators, allowing them to drain Axie Infinity's treasury of millions of dollars [130301]. (b) omission: The software failure incident can also be linked to omission. The hack resulted in the omission of the system's intended functions, as the hackers were able to exploit vulnerabilities and gain unauthorized access to the network, leading to the theft of a substantial amount of cryptocurrency [130301]. (c) timing: The timing of the software failure incident is not explicitly mentioned in the article. (d) value: The software failure incident can be associated with a failure in value. The hackers were able to manipulate the system to steal a significant amount of cryptocurrency, resulting in a loss of value for Axie Infinity and its players [130301]. (e) byzantine: The software failure incident does not align with a byzantine failure, as there is no mention of inconsistent responses or interactions within the system. (f) other: The software failure incident can also be described as a failure due to a security breach. The hackers exploited vulnerabilities in the system, leading to unauthorized access and the theft of millions of dollars worth of cryptocurrency [130301].

IoT System Layer

Layer Option Rationale
Perception None None
Communication None None
Application None None

Other Details

Category Option Rationale
Consequence property (d) property: People's material goods, money, or data was impacted due to the software failure. The software failure incident involving a hack on the Axie Infinity game resulted in significant financial consequences. A hacker exploited the Ronin blockchain to steal $620 million worth of cryptocurrency, including $25 million in the USDC stablecoin and 173,600 ether from Axie Infinity's treasury. The total value of the stolen assets was reported to be $229 million after the drop in ether's price [130301].
Domain entertainment (a) The failed system in this incident was related to the entertainment industry. The software failure incident occurred in the context of the play-to-earn game Axie Infinity, which is a Pokemon-inspired game where players battle and breed Axie monsters owned as NFTs [Article 130301]. The game was generating significant revenue for the developer and players were earning cryptocurrency to live off of, indicating its strong ties to the entertainment industry.

Sources

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