- Andean Medjedovic is accused of exploiting the DeFi protocols vulnerability
- He manipulated the price on KyberSwap and Indexed Finance and stole $65M
- He also used multiple methods to launder money
- He faces a sentence 20 years for each of the counts
Canadian Andean Medjedovic has been charged with a number of cybercrimes, key among them exploiting the DeFi vulnerabilities in the KyberSwap and Indexed Finance protocols and fraudulently stealing $65M. He also attempted to launder the stolen funds, wired them through other blockchains, and forged documents for KYC.
He remains at large, but the Netherlands’ Public Prosecution Service and the Dutch National Police Cybercrime Unit in The Hague are already on the lookout for him and he faces a “maximum penalty of 10 years in prison on the unauthorized damage to a protected computer count and 20 years in prison on each of the other counts.”
Details on the Andean Medjedovic Hack and Scam
Medjedovic discovered vulnerabilities in the DeFi protocols KyberSwap and Indexed Finance and used them to manipulate asset prices and mislead investors. On the technical side, which is openly and in detail in the report, he did a complex scheme from price manipulation to money laundering attempts.
First, he found a vulnerability in the price update mechanism, which allowed him to temporarily influence the calculations made by the smart contract. To affect this he needed to put more liquidity, and this is where flash loans helped him. They allowed him to borrow hundreds of millions and pass it through the protocol.
Then the protocol incorrectly but predictably fixed the changed value of the asset, as a result, he had several options how to get a profit:
- Withdraw assets at an artificially favorable price
- Withdraw more assets from the pool than he deposited
- Take the victims’ assets off the record
After that, he returned the flash loans in one payment without any problems, while the investors and the pool suffered losses.
And of course, he needed to launder this money later, for which he was very thorough and even called it a “moneyMovementSystem.” He bought other assets, conducted bridging transactions to move funds across different blockchains, and of course, used crypto-mixers.
Moreover, his associates opened accounts at various crypto exchanges using false and borrowed identities to further cover their tracks and even after one bridge protocol froze several of his transactions he paid an undercover law enforcement agent $80,000 to bypass restrictions and unlock $500,000 in stolen crypto.
Perhaps most outrageously, he allegedly attempted to extort KyberSwap developers, investors, and members of its DAO through a “sham settlement proposal.”
The case eventually went to the U.S. Department of Justice, which filed the charges:
- one count of wire fraud
- one count of unauthorized damage to a protected computer
- one count of attempted Hobbs Act extortion (refers to the use of force, threats, or fear to unlawfully obtain property)
- two counts of money laundering
And while he remains at large for now, if he’s caught he’s looking at a big sentence. According to the department:
“If convicted, he faces a maximum penalty of 10 years in prison on the unauthorized damage to a protected computer count and 20 years in prison on each of the other counts.”
Conclusion
Last year’s DeFi cybercrime statistics were already sad, and there’s no telling what this year’s statistics will be. But $65 million is a pretty big contributor to that, unfortunately.
What’s noteworthy is how thoroughly the perpetrator approached this, and it seems he tried to make the most of the situation.
While blockchain technology is inherently secure, no system is perfect. Hopefully, developers will continue to improve their solutions, and situations like this will be reduced to zero.
Be aware and stay tuned.
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