Crypto casino Stake has confirmed that it fell victim to a security breach, resulting in the theft of approximately $41 million in cryptocurrency from its hot wallets.
The company disclosed that the breach occurred around 10:00 am ET on a Monday morning. Prior to the official confirmation, cybersecurity firm Cyvers had already identified “multiple suspicious transactions” related to Stake. These transactions resulted in the unauthorized withdrawal of approximately $15.7 million from the Ethereum network due to a “private key leak.”
All the stable coins are converted to $ETH and distributed to different EOAs.
— 🚨 Cyvers Alerts 🚨 (@CyversAlerts) September 4, 2023
ZachXBT, a blockchain enthusiast known for investigating illicit transactions and individuals, corroborated Cyvers’ findings and revealed that an additional $25.6 million had been siphoned from Stake’s hot wallets to the Polygon and Binance Smart Chain networks.
— PeckShield Inc. (@peckshield) September 4, 2023
Stake responded by freezing the affected wallets while maintaining the functionality of others, such as Bitcoin wallets. The company assured its users that all remaining funds remained secure. Stake later announced that operations had returned to normal early yesterday evening.
The Challenges of Cryptocurrency
This incident highlights one of the significant challenges associated with cryptocurrencies. While proponents appreciate their decentralized and largely anonymous nature, these features also make it exceedingly difficult, often impossible, to trace and apprehend cybercriminals who steal digital assets. In this case, Cyvers reported that the stolen funds were converted into ether (Ethereum) and transferred to external wallets, making it highly unlikely for Stake to recover the stolen funds.
Stake’s Rise to Prominence
Stake gained prominence over the past few years for several key reasons. First and foremost, it positioned itself as a crypto casino, allowing users, including gamblers in the United States, to circumvent regulations governing financial transactions in gambling by using cryptocurrency. All one needed was a crypto wallet to deposit and withdraw funds freely.
The second reason for Stake’s success was its appeal to online streamers in the US. The world’s most prominent online gambling streamers, excluding poker players, frequented Stake, providing the casino with millions of viewers annually. Notable streamers included Drake, a globally influential rapper, who often live-streamed his substantial wins and losses on Stake, often totaling hundreds of thousands, if not millions, of dollars.
However, when Twitch implemented a ban on streams featuring unregulated online casino gambling in October 2022, with Stake and three others singled out, many casino streamers migrated to the emerging competitor, Kick. Interestingly, Kick was founded that same month by the co-founders of Stake.
Kick has since signed lucrative deals with several popular gambling streamers, worth tens of millions of dollars each. Although the platform is likely operating at a loss, it serves as a strategic loss leader, attracting viewers to the world of gambling and guiding them towards the crypto casino offered by Stake.