CertiK, a leader in smart contract security, has released a statement countering previous allegations from the cryptocurrency exchange Kraken. It insists its actions were ethically sound and focused on identifying security vulnerabilities.
The firm affirmed that it had returned all funds extracted during the test and denied any extortion or demand for a bounty. This announcement comes amidst the firm’s ongoing efforts to enhance blockchain security through rigorous testing and auditing.
Detailed test procedures and fund recovery
CertiK’s recent clarification highlights that the operation was meant to uncover potential security lapses that could allow the unauthorized creation of funds within user accounts. Throughout the testing phase, CertiK could withdraw funds only from Kraken’s cold wallets, ensuring no user assets were compromised. The returned assets were meticulously calculated based on detailed transaction logs maintained by CertiK.
Q&A to recent CertiK-Kraken whitehat operations: 1. Did any real user lose fund？No. Cryptos were minted out of air, and no real Kraken user’s assets were directly involved in our research activities.2. Have we refused to return the funds?No. In our communication with…
— CertiK (@CertiK) June 20, 2024
CertiK also acknowledged transferring minor sums to Tornado Cash—a coin mixer previously sanctioned by the U.S. Treasury—to demonstrate the exploit’s potential. This testing method was part of CertiK’s broader strategy to expose vulnerabilities similar to those found in other smart contracts that have led to significant security breaches.
Transparency and ethical considerations
Despite the speculative nature of its testing methods, which included public leaks of specific procedures on social media, CertiK remains steadfast that its primary objective was the remediation of the flaw rather than financial gain.
The issue of a bounty was explicitly addressed, with CertiK stating that their actions were not motivated by monetary rewards. Kraken’s security team has yet to announce any bug bounty related to this incident, reinforcing CertiK’s claims of ethical conduct.
Update: We can now confirm the funds have been returned (minus a small amount lost to fees). https://t.co/cHkjPt3m2A
— Nick Percoco (@c7five) June 20, 2024
Kraken initially disputed the accuracy of the funds returned, particularly highlighting an alleged discrepancy involving 155,818.44 MATIC tokens. However, Nick Percoco, Kraken’s Chief Security Officer, quickly clarified this, later confirming that all funds were returned, less transaction fees. This resolution underscored the challenges in accurately assessing and managing withdrawals during security tests, particularly those involving large sums and multiple cryptocurrencies like ETH, USDT, and XMR.
Operational risks and resilience of tornado cash
Despite facing operational challenges and sanctions that limit its use within the U.S., Tornado Cash continues to function, facilitating the anonymity of cryptocurrency transactions. This persists even as notable cryptocurrencies like USDC have moved to blacklist interactions with Tornado Cash contracts, effectively freezing transferred funds.
#Certik : At first glance, it seems that Certik's exploit consists of:1. Creating a contract & depositing funds into it2. Generating the LogFeeTransfer() event3. @krakenfx scans LogFeeTransfer() on its deposit addresses and doesn't seem to verify if the MATIC are really there pic.twitter.com/QI4bdXJdbz
— Naïm Boubziz (@BrutalTrade) June 20, 2024
This scenario highlights the ongoing struggle between ensuring operational security and adhering to regulatory standards, especially as digital currencies and their associated platforms become increasingly mainstream.
CertiK’s latest tests and subsequent clarifications are critical reminders of the sophisticated nature of blockchain exploits and the continuous need for vigilant security practices in the cryptocurrency industry. As the sector evolves, ethical hacking and exchanges’ responses will play pivotal roles in shaping the security landscape.
The post CertiK Clears the Air on Ethical Hacking Practices, Kraken Confirms Full Fund Return first appeared on Coinfea.