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bZx Crypto Exchange Theft Leads to Class Action Lawsuit

A decentralized finance (DeFi) lending platform called bZx suffered a 2021 hack that led to a loss of approximately $55 million in cryptocurrency. A class action lawsuit has been filed in San Diego on behalf of victims of the crypto theft, naming the bZx founders and investors as defendants.

The cryptocurrency exchange bZx allows users to borrow or loan crypto, and had already been targeted by two other hacks before a phishing scam resulted in the $55 million heist. bZx could reportedly only recover about $8 million in cryptocurrency.

An employee was sent a phishing email embedded with a malicious macro hidden in an MS word document, which was downloaded and software was able to obtain the developer’s personal mnemonic cryptocurrency wallet phrase. After gaining control of the bZx keys, the hacker drained the protocols.

How Common are Crypto Heists?

According to market analysts at Chainalysis, scammers and fraudsters stole $3.2 billion in various cryptocurrencies in 2021. But in the first four months of 2022, $2.9 billion worth of crypto has already been stolen.

The number of crypto heists has not changed dramatically, but the attacks have become larger, in part due to existence of more Decentralized Finance (DeFi) projects.

There are two primary ways criminals target cryptocurrency: stealing it directly, or using a scheme to trick people into handing it over.

Typically a cryptocurrency is held in a “wallet” with private keys. These keys are usually stored somewhere and hacked.

How Can Consumers Protect Crypto?

Unlike a bank, governments do not have a financial claims scheme to guarantee deposits if an exchange goes bankrupt or funds are lost. Crypto Exchange theft litigation may be the only way to recover funds.

One way consumers can protect themselves from theft is to transfer cryptocurrency from an exchange to a software wallet or a hardware wallet. But wallets require keys and if the private keys are lost, the cryptocurrency is lost.

What are Common Crypto Phishing Scams?

Some of the top crypto and blockchain phishing scams include the following:

  • Malicious AirDrops: Airdrops are a promotional tool for new products, services or platforms. Businesses may airdrop cryptocurrencies into a user’s wallet address in exchange for some activity. But with the airdrop and email can contain malware or connect the user to a phony wallet.
  • Seed Phrase Phishing: A seed phrase is a master key to crypto wallets. Some phishing scams trick users into divulging their seed phrase.
  • Fake Emails, Websites And Social Media: Phishing emails and fake URLs are not new tools for hackers, but they are still very effective. Consumers continue to fall for copycat websites, social media accounts and spam emails. And this is exactly how bZx lost $55 million, when a crypto developer accidentally opened a phishing email with a malware attachment.

Our lawyers are currently involved in a wide variety of data theft and privacy litigation nationwide. Contact The Lyon Firm for more information on class action crypto exchange theft lawsuits.