The cryptocurrency industry has seen explosive growth, with Bitcoin's price hitting the $100,000 mark, drawing increased attention from investors—and hackers. Centralized exchanges (CEXs), which play a vital role in trading and storing digital assets, have become prime targets for cyberattacks. Hackers exploit vulnerabilities in wallet infrastructure, governance policies, and third-party integrations, making robust security essential for these platforms.

This article explores the methods hackers use to attack cryptocurrency exchanges, real-world examples of high-profile breaches, and strategies exchanges can implement to strengthen their defenses.

1. Social Engineering: The Art of Human Exploitation

Social engineering is a common attack vector in which hackers manipulate individuals into compromising security measures. Phishing, a specific tactic within social engineering, is particularly prevalent. Hackers use deception to trick employees or users into revealing sensitive information or granting access to critical systems.

• Phishing Emails: Attackers pose as trusted entities—such as executives, regulators, or technical support—to lure employees into sharing credentials, clicking malicious links, or downloading malware.

• Clone Websites: Fake domains mimic legitimate exchange platforms, capturing sensitive user data during login attempts.

• Fabricated Urgency: Hackers create false crises or emergencies to pressure employees into bypassing security protocols.

How Cobo Helps: Cobo’s products and services mitigate these risks through a robust combination of security tools and best practices:

• Cobo Guard: This secure mobile app strengthens defenses against phishing and social engineering by requiring multi-factor authentication (MFA) for all transactions. With features such as biometric verification and real-time transaction notifications, Cobo Guard ensures that even if an employee's credentials are compromised, unauthorized actions cannot proceed without additional layers of approval.

• Governance Policies: Multi-approval policies ensure that no single individual can authorize high-risk actions.

2. Malware Attacks: Silent and Dangerous

Malware is a stealthy tool that attackers use to infiltrate systems, steal credentials, and monitor activity undetected.

• Advanced Persistent Threats (APTs): These sophisticated attacks embed malware to exploit vulnerabilities over time.

• Keylogging and Credential Theft: Malware captures sensitive data like private keys or passwords, leading to unauthorized transactions.

How Cobo Helps: Cobo protects exchanges from malware attacks with robust security technologies and operational controls:

• MPC Wallets: Eliminate single points of failure by ensuring private keys are never reconstructed in full, making it impossible for attackers to steal them entirely.

• Advanced Risk Controls: Transaction policies such as whitelisting, daily limits, and time-based approvals prevent unauthorized transactions initiated by malware.

3. Supply Chain Attacks: Hidden Risks in Third-Party Integrations

Supply chain attacks exploit vulnerabilities in third-party tools or service providers.

• API Breaches: Weak APIs provided by custodial services or cloud providers are a common target.

• Compromised Software Updates: Attackers introduce backdoors via malicious updates.

How Cobo Helps: Cobo addresses the risks of supply chain attacks with a multi-faceted security approach:

• Secure APIs: Cobo’s Wallet-as-a-Service (WaaS) platform offers secure APIs to minimize vulnerabilities and ensure safe third-party integration

• Real-Time Monitoring: Continuous monitoring of API activity and system updates detects and mitigates suspicious behavior or unauthorized changes.

• Trusted Update Mechanisms: Cobo uses secure delivery pipelines for all software updates, reducing the risk of malicious code introduction during deployments.

Real-World Examples of Exchange Hacks

• XT.com Wallet Infrastructure Breach (November 2024): The exchange fell victim to an attack that exploited vulnerabilities in its wallet infrastructure, resulting in an abnormal transfer of $1.7 million worth of assets. While XT.com reassured users that their funds were unaffected—citing its policy of reserving 1.5x user deposits to ensure security—blockchain security firm Peckshield reported that the stolen assets had already been swapped for 461.58 ETH and were sitting in a wallet with the address 0xB43f…8F83.

• WazirX Malicious Smart Contract Hack (September 2024): $230 million was lost due to a malicious smart contract upgrade, exposing governance weaknesses and sparking a class action lawsuit against the Indian cryptocurrency exchange.

• DMM Bitcoin Vulnerability Exploit (May 2024): Approximately 4,500 Bitcoins were stolen after hackers exploited vulnerabilities in wallet infrastructure. The Japanese exchange will shut down in March 2025 after transferring its assets to trading platform SBI VC Trade.

• CoinEx Private Key Breach (September 2023): The exchange suffered a major security breach resulting in the theft of approximately $70 million. Hackers accessed private keys for user hot wallets, transferring substantial amounts of various cryptocurrencies, including nearly 5,000 ETH and 231 BTC. Despite the significant loss, CoinEx’s cold wallets remained unaffected. 

• GDAC Hot Wallet Hack (April 2023): South Korean crypto exchange GDAC announced a hack that resulted in the theft of nearly $13 million. Hackers transferred assets from GDAC's hot wallet to an unidentified wallet, amounting to about 23% of its total custodial assets.

• Liquid Warm Wallet Hack  (August 2021): In August 2021, attackers exploited vulnerabilities in Liquid's warm wallets, resulting in the theft of approximately $97 million in various cryptocurrencies. The hackers used unauthorized access to transfer funds to multiple addresses and laundered a significant portion of Ethereum tokens through decentralized exchanges to obscure the trail. This breach highlighted the need for robust wallet security measures, such as properly implemented multi-party computation (MPC) protocols and secure transaction authorizations within hardware-isolated environments.

• Bithumb Hot Wallet Breach (June 2018): In June 2018, Bithumb, one of South Korea's largest cryptocurrency exchanges, experienced a significant security breach resulting in the theft of approximately $31 million worth of cryptocurrencies. The attack targeted the exchange's hot wallets, which are more vulnerable due to their connection to the internet.

• Coincheck Hot Wallet Breach (January 2018): Japanese exchange Coincheck was hacked in January 2018, resulting in the loss of 523 million NEM tokens, valued at $534 million at the time. The breach was attributed to inadequate security measures, such as storing assets in hot wallets without multisignature support.

• Bitfinex MultiSignature Wallet Exploit (August 2016): In August 2016, Bitfinex experienced a major security breach, with hackers stealing about 119,754 Bitcoins, worth approximately $72 million then. The attackers exploited vulnerabilities in the exchange's multisignature wallet architecture. In 2022, U.S. authorities arrested two individuals for attempting to launder the stolen funds.

• Mt. Gox Bitcoin Exchange Collapse (February 2014): Once handling over 70% of global Bitcoin transactions, Mt. Gox suffered a catastrophic breach in 2014, losing approximately 850,000 Bitcoins, valued at around $450 million at the time. This incident led to the exchange's bankruptcy and intensified scrutiny of cryptocurrency security practices.

These incidents underscore the critical need for cryptocurrency exchanges to implement comprehensive security frameworks. From robust wallet architectures and stringent governance policies to proactive system monitoring and employee training, a multi-layered approach to security is essential. 

As the cryptocurrency market evolves, only exchanges that prioritize and adapt their security measures will be able to build trust, protect user assets, and ensure long-term resilience against increasingly sophisticated threats.

Building Resilience Against Crypto Exchange Hacks

To protect their platforms and users, cryptocurrency exchanges must adopt comprehensive strategies:

• Advanced Wallet Technologies:

  • Cobo’s Wallet-as-a-Service (WaaS) offers a comprehensive suite of four distinct wallet technologies, empowering crypto exchanges to securely and efficiently manage digital assets across over 80 blockchains.

  • Cobo’s MPC Wallets eliminate single points of failure, providing secure, policy-driven access to funds.

  • Cobo’s Custodial Wallets leverage a 3-tier hot-warm-cold storage architecture, ensuring efficient trading operations while minimizing exposure to online threats.

• Compliance and Monitoring:

  • SOC 2 and ISO 27001 certifications validate Cobo’s adherence to international security standards, providing exchanges with built-in compliance assurance.

• Rapid Integration:

  • With support for 80+ blockchains and 3,000+ tokens, Cobo WaaS allows exchanges to scale efficiently, deploy new assets swiftly, and maintain high operational resilience.

Scaling Securely with Cobo

As the cryptocurrency market grows, so do the threats facing exchanges. Only platforms that prioritize advanced security measures will thrive in this landscape. Cobo offers tailored solutions, from MPC and Custodial Wallets to seamless third-party integration via WaaS, empowering exchanges to secure assets, scale operations, and build trust.

Explore how Cobo can help your exchange safeguard user assets and ensure long-term resilience. Book a demo today.