The U.S. Attorney for the Southern District of New York called the case “the first criminal case involving an attack on a smart contract operated by a decentralized exchange.”
The U.S. Attorney for the Southern District of New York (SDNY) announced in a press release on July 11 that it is charging Shakeeb Ahmed, a senior security engineer at an unidentified company, with money laundering using an unnamed Solana-based protocol in July 2022, marking the first time the U.S. government has brought charges in connection with a smart contract attack on a decentralized exchange.
Ahmed allegedly exploited the Solana exchange’s smart contracts to manipulate the platform’s price data and generate $9 million in inflated fees. Ahmed allegedly used flash loans during the attack and utilized his skills in reverse engineering smart contracts and blockchain auditing.
After withdrawing the stolen funds in cryptocurrency, Ahmed allegedly attempted to negotiate with the cryptocurrency exchange, offering to return all but $1.5 million of the stolen funds as long as the exchange did not report the incident to law enforcement.
Officials noted that this marks the first criminal case involving a smart contract attack on a decentralized exchange.
While SDNY did not identify the targeted exchange, the date, amount stolen, and mention of Solana closely match the 2022 attack on Crema Finance.
The accused failed to cover his tracks
Officials said Ahmed employed a variety of methods to launder the stolen fees and conceal his transactions. He allegedly conducted token swaps, bridge transactions between Solana (SOL) and Ethereum ( ETH ), converted funds into the privacy coin Monero ( XMR ), and traded on overseas cryptocurrency exchanges.
U.S. Attorney Damian Williams said Ahmed was unable to conceal his activities. Williams said nothing the defendant did "covered his tracks or fooled law enforcement," and said authorities were able to track the movement of funds.
Ahmed now faces up to 20 years in prison for wire fraud and money laundering charges. As with all criminal cases, Ahmed is presumed innocent until proven guilty in a court of law.
On July 10, the SDNY charged another individual with conducting a deception scheme that resulted in the theft of $450,000 worth of cryptocurrency and NFTs through OpenSea, and officials acknowledged in their latest announcement that the case is another example of cryptocurrency fraud.
