TRM Labs Study: Hacking Losses Decreased by 70% in the First Quarter of This Year, Possibly Linked to Tornado Cash and Mango

In 2022, it has been a lucrative year for hackers in the cryptocurrency industry, with over 150 hacking incidents throughout the year resulting in approximately $3.7 billion being stolen. However, the scale of hacking incidents has temporarily decreased this year following two law enforcement actions from the previous year.

Hacker Incidents See Significant Decrease in Losses and Scale

According to research by blockchain analytics company TRM Labs, nearly 40 cryptocurrency hacking incidents in the first three months of 2023 resulted in approximately $400 million in losses, a 70% decrease from the same period in 2022. Furthermore, the amount stolen in the first quarter of 2023 due to cryptocurrency hacking incidents was lower than any quarter of the previous year.

Despite an overall 45% decline in the crypto market during this period, it is significantly less than the decline in the amount stolen.

In terms of the average scale of hacking attacks, 2023 also saw a significant decrease compared to 2022. The average loss per incident in the first quarter of 2023 was around $10.5 million, while it was $30 million in the previous year, with the number of hacking incidents remaining around 40.

Additionally, as of the first quarter of this year, victims have recovered over half of the stolen funds. For example, in the Tender.fi hacking incident in March this year, hackers stole $1.5 million in assets. However, upon return, the hacker received 62.15 ETH, approximately $850,000, as a bug bounty.

Possible Reasons for Deterrence of Hackers

Regarding this phenomenon, TRM Labs believes that two recent events may have deterred potential attackers:

1. Mango Markets: Avraham Eisenberg was arrested by U.S. authorities after manipulating prices in the DeFi protocol Mango in October last year. Despite returning some funds, the SEC charged him with violations of securities fraud and market manipulation laws. Additionally, the protocol also sued him for a claim of $47 million plus interest.

   This incident shows that even if victims agree not to pursue legal action, it does not provide protection.

2. Tornado Cash: The U.S. Treasury imposed sanctions on the mixer Tornado Cash in August last year, citing that the platform had been used for over $7 billion in cryptocurrency money laundering since its establishment in 2019.

   U.S. government sanctions on cryptocurrency increase the potential cost of hacking attacks and make it more difficult to launder illicit assets.

In addition to the increased frequency of law enforcement actions and regulatory standards, advancements in blockchain intelligence tools have also made hacking attacks more difficult.

Note: The second reason may seem somewhat tenuous, as Tornado Cash was sanctioned in August, but the number and amount of hacking incidents in the fourth quarter of 2022 were the highest of that year.

Reduction in Hacker Incidents May Only Be a Short-Term Phenomenon

Although the scale of hacking incidents this year has relatively decreased, TRM Labs also states that this is not a long-term trend and may only be temporary.

According to TRM Labs' review of hacking attacks and vulnerabilities in 2022, the top ten hacking incidents of that year accounted for approximately 75% of the total stolen amount, indicating that any large-scale hacking incident would significantly increase the scale of hacking attacks for that quarter.