The FBI has issued a list of recommendations for investors and platforms to limit the risks associated with this type of investment, in light of the increase in hacks in the decentralised finance sector (DeFi). The Federal Bureau of Investigation particularly points out the risks linked to flash loans, bridging and price manipulation.
FBI warns of DeFi dangers
The Federal Bureau of Investigation (FBI) issued a statement on August 29 to warn US citizens about the dangers of decentralised finance (DeFi) hacks.
The FBI warns that cyber criminals are increasingly exploiting vulnerabilities in decentralized finance (DeFi) platforms to steal investors cryptocurrency. If you think you are the victim of this, contact your local FBI field office or IC3. Learn more: https://t.co/fboL1N17JN pic.twitter.com/VKdbpbmEU1
– FBI (@FBI) August 29, 2022
Supporting data, the FBI reminds us that over the first quarter of 2022, 97% of funds stolen from the cryptocurrency sector are directly related to decentralized finance:
“Between January and March 2022, cybercriminals stole $1.3 billion in cryptocurrencies, nearly 97% of which was from DeFi platforms, according to US blockchain analytics firm Chainalysis. This is an increase of 72% over 2021 and 30% over 2020. “
In its statement, the FBI notes that cybercrime is increasingly moving towards exploiting flaws in smart contracts by taking advantage of “the open source nature of DeFi platforms”, effectively losing money for investors.
The Bureau points to three types of attacks that are particularly popular, starting with flash loans, a process sometimes used to exploit certain flaws, as was the case with the $8.8 million Crema Finance hack last month.
Then there is the exploitation of cross-chain bridges, as in the Nomad hack earlier this month for the considerable sum of $190 million. Note that according to a recent report by Chainalysis, bridges are the main cause of hacks in decentralised finance.
Finally, the FBI mentions price manipulation through certain vulnerabilities via oracles or leverage.
The Federal Bureau’s recommendations
The FBI has also drafted several paragraphs of recommendations for investors to limit the risks associated with their use of the various DeFi protocols. In particular, the Bureau recommends that investors seek professional financial advice if they are unsure and that they choose platforms that have been audited by independent firms.
The emphasis is also placed on seeking prior information on the seriousness of the various protocols, smart contracts and platforms, while being aware of the risks associated with this type of investment.
Some recommendations are also made to the platforms concerned, such as real-time monitoring of possible flaws or rigorous testing of the code, or even the development of a plan in anticipation of a possible vulnerability or exploit in order to limit the damage.
We can only support the FBI’s recommendations on what to research before investing your money in decentralised finance, and as the saying goes: Do Your Own Research (DYOR).