While the gaming mainstream remains deeply suspicious of all things crypto, one of its apparent successes has been Axie Infinity: a Pokémon-style game built around pets called Axies that can be traded, battled, and claimed to be a kind of ‘true value. Axie Infinity’s ecosystem was valued in the hundreds of millions. Then, on March 23, the company’s “sidechain” Ronin network was hacked, with the perpetrators stealing Ethereum and USDC stablecoins valued in the region of $600 million at the time.
The game’s developer, Sky Mavis, was forced to acknowledge the hack and disable token revocation. But not before Trung Nguyen, the CEO and co-founder, transferred $3 million worth of AXS, Axie’s main currency, from the game’s blockchain to Binance, a crypto exchange.
I appreciate this becoming a word salad of crypto terminology. The main point is that, if the outside world was not aware of the hack, or if in-game trading would be suspended as a result, a key inside player transferred a lot of value from the Axie ecosystem. Oh: and no one should have realized it.
The transactions were first noticed and analyzed by Asobs, a youtuber who analyzes the crypto scene (opens in new tab). They were tipped off about a wallet that had moved 48,838 AXS tokens from Ronin (the sidechain network) to Binance, a huge amount, and managed to sift through this wallet’s transactions to see that it was the largest initial payment of AXS tokens. had received when the game was launched.
Asobs then tracked down even more wallets that allegedly belonged to Sky Mavis employees using this method, a great tactic since the studio regularly transfers AXS to employees. Several of these had also made major trades at the same time as the wallet that Asobs would eventually link to Nguyen.
Bloomberg Business then took over, which quickly led to Sky Mavis admitting the transaction and Nguyen owning the wallet in question.
Kalie Moore, a spokeswoman for Sky Mavis, alleged against Bloomberg (opens in new tab) Nguyen was basically trying to help Axie Infinity’s economy and make sure there was enough liquidity available. She wrote:
“At the time, [Sky Mavis] understood that our position and options would be better the more AXS we had on Binance. This would give us the flexibility to pursue different options to secure the required loans/capital. The Founding Team chose to transfer it out of this wallet to ensure that short-sellers, who follow official Axie wallets, couldn’t bring the news to the fore.”
Moore adds that suggestions for a different motive are “baseless.” Following this coverage, Nguyen took to social media himself:
The Founding Team chose to take it out of my wallet to ensure that shortsellers, who follow official Axie wallets, wouldn’t be able to bring the news to the fore.July 28, 2022
“This story contains speculation about insider trading,” Trung writes. “These allegations are baseless and false. In fact, the Founding Team even deposited $7.5 million from a well-known Axie multi-sig wallet TO Ronin Network before closing the bridge to prevent short-sellers from watching. My life’s work is Axie Infinity and the community we’ve created together. I take responsibility for the security breach and will use it as a learning experience.”
Trung also claims that “the bridge has reopened with all player funds backed 1:1. Many in the media have conveniently ignored this, as it does not fit their pre-determined narratives.”
True, Sky Mavis immediately raised just over $150 million in funding after the hack, some of which was intended to compensate victims of the attack, and the suspension of trade was only temporary. But the 1:1 claim forgets to mention that the value of an AS token was $64 before the hack and is now trading at over $18.
“We can see the money has moved,” Asobs says. “The only question is what happened behind the money.”
5/19I have contacted someone within Sky Mavis with the information. The story started with no one except the founders who knew about the hack before it was announced. Then it became a few people who possibly knew. Now they claim that people inside Binance also knew…July 28, 2022
Whatever has happened here is cloudy in a way that is typical of crypto: a space where tangible value is always several steps away and, in the case of ecosystems like Axie Infinity, is ultimately controlled by their administrators.
There is no doubt about one thing, and that is that the hack was very real. The US Treasury Department pinned the robbery (opens in new tab) on the North Korea-based hacker collective calling itself Lazarus Group, adding them to its international sanctions list, saying in a statement to Tech With Brains that this was due to the FBI identifying a digital wallet linked to the robbery.
“Through our investigation, we have been able to confirm that Lazarus Group and APT38, cyber actors affiliated with the DPRK, are responsible for the $620 million theft of Ethereum reported on March 29,” an FBI representative told Tech With Brains. . “The FBI, in coordination with the Treasury Department and other US government partners, will continue to denounce and combat the DPRK’s use of illegal activities, including cybercrime and crypto theft, to generate revenue for the generate regime.”
Lazarus Group has stolen hundreds of millions of dollars worth of crypto in recent years, and some crypto security experts estimate that as a result, the rogue nuclear state could now sit on more than half a billion non-laundered crypto assets. The US says this is all about avoiding sanctions and funding its weapons programs, and takes the threat very seriously: recently jailing a former Ethereum Foundation employee (opens in new tab) for more than five years (and fined him $100,000) for giving a presentation in North Korea in 2019 on “using cryptocurrency technologies to evade sanctions and launder money.” Probably wasn’t the wisest title for a lecture.
As for Axie Infinity, it’s chugging along, though recent reports suggest the in-game economy is having its own meltdown as digital “landlords” struggle to find players willing to do the dirty work for them. (opens in new tab) Playing to earn never seemed like a particularly appealing prospect, and when you consider the kinds of stories that flow together around these projects, it’s no wonder.