The Mystery Unveiled: The Exchange That Sent The $5 Million Ethereum Fees Transactions

A popular blockchain security company finally revealed who was the sender of last week’s Ethereum transactions with abnormally high fees.

Reportedly, it’s a small South Korean cryptocurrency exchange that pays little to no attention to its security protocols.

The Backstory

Last week, CryptoPotato reported on two transactions with abnormally high fees that took place on Ethereum’s network. Both of them were sent out from the same address. The first carried 0.55 ETH and paid a fee of 10,668 ETH, while the second one moved 350 ETH and paid the exact same transaction fee. The total amount in dollars was about $5.2 million.

Both transactions were included in blocks mined by Spark Pool and Ethermine, respectively. The operators of the two mining pools declared that they will keep the money and distributed it to their miners.

It was unclear who the sender was, but Vitalik Buterin, Ethereum’s co-founder, speculated that it might be someone who’s trying to blackmail a cryptocurrency exchange.

His theory was that “hackers captured partial access to exchange key; they can’t withdraw but can send no-effect txs with any gas price. So they threaten to burn all funds via tx fees unless compensated.”

The Exchange In Question is Good Cycle

In a recent update, the popular blockchain security company PeckShield said that the victim was a small P2P exchange in South Korea called Good Cycle.

Update: We have identified the victim, a small P2P exchange in Korea called Good Cycle, which appears to be a Ponzi Scheme project. Our investigation found that their security is really lacking, e.g., using HTTP instead of HTTPS, and could be easily hacked.

— PeckShield Inc. (@peckshield) June 16, 2020

The company concluded that the exchange itself might be a Ponzi scheme because of the lack of any serious security protocols.

Even though it’s currently unavailable on the exchange’s official website, a local report indicates that Good Cycle issued a notice that it will be upgrading its security and nothing about being hacked.

However, there are two new transactions to Ethermine and Spark Pool, saying, “I am the sender.” Both mining pool operators haven’t yet commented on the matter.

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