Off-chain Attacks: A New Threat Facing Encryption Asset Holders

With the development of blockchain technology, we often focus on on-chain security issues, such as smart contract vulnerabilities or hacker intrusions. However, a series of recent events indicate that risks have spread to the off-chain world.

Last year, a cryptocurrency billionaire recounted his experience of a kidnapping attempt during a court hearing. The attackers tracked his movements using GPS, forged documents, and disposable phones, and launched their attack from behind as he was going upstairs. Fortunately, the entrepreneur managed to escape, but this incident highlights the new types of threats faced by holders of crypto assets.

As the value of encryption assets continues to rise, physical attacks targeting holders have become increasingly common. This article will delve into the methods of such attacks, review typical cases, explore the underlying criminal networks, and provide practical prevention advice.

The Nature of a Wrench Attack

The concept of "wrench attack" originates from a webcomic that describes attackers obtaining passwords or assets not through complex technical means, but rather through simple physical threats. This method of attack is direct, efficient, and has a low barrier to entry, making it a preferred tactic for some criminals.

Recent Typical Cases

Since the beginning of this year, there has been an increasing trend in kidnapping cases targeting cryptocurrency holders. Victims include core members of projects, industry celebrities, and even ordinary users.

In early May, French police successfully rescued the father of a cryptocurrency tycoon. The kidnappers demanded a huge ransom and inflicted brutal bodily harm on the victim.

In January, the co-founder of a well-known hardware wallet company and his wife were attacked at home by armed assailants. The kidnappers also employed extreme violence and demanded a ransom of 100 bitcoins.

In New York, an Italian cryptocurrency investor was subjected to illegal detention and torture for three weeks. The criminal gang used various means to threaten the victim, forcing him to hand over his wallet private keys. The uniqueness of this case lies in the fact that the perpetrators are likely to be "insiders," who precisely targeted the victim through on-chain analysis and social media tracking.

In mid-May, a family of a co-founder of a cryptocurrency trading platform was nearly kidnapped in Paris. Fortunately, timely intervention by a passerby prevented the incident from occurring.

These cases indicate that, compared to on-chain attacks, off-chain violent threats are more direct and effective. It is noteworthy that many participants in such crimes are quite young, usually between the ages of 16 and 23, and possess basic knowledge of encryption.

In addition to the publicly reported cases mentioned above, the security team has also received reports from some users who encountered control or coercion during offline transactions. Furthermore, there are some "non-violent coercion" incidents, where attackers threaten victims by leveraging their private information.

It should be noted that known cases may only be the tip of the iceberg. Many victims choose to remain silent for various reasons, making it difficult to accurately assess the true scale of off-chain attacks.

Crime Chain Analysis

According to the analysis by the Cambridge University research team, the criminal chain of wrench attacks typically includes the following key links:

1. Information Locking: Attackers initially assess the scale of the target's assets by analyzing on-chain data, social media information, and more.

2. Reality positioning and contact: After identifying the target identity, the attacker will attempt to obtain information about their real-life circumstances, such as residence, frequent locations, etc.

3. Violent threats and extortion: Once the target is under control, attackers often use violent means to force victims to hand over key information such as private keys and mnemonic phrases.

4. Money Laundering and Fund Transfer: After obtaining the private key, the attacker will quickly transfer assets, often involving the use of mixers, multi-hop transfers, etc. to evade tracking.

Countermeasures

In the face of wrench attacks, traditional methods such as multi-signature wallets or decentralized mnemonic phrases may not be practical and could instead exacerbate violent behavior. A more prudent strategy is "to give something in return, and to keep losses manageable":

• Set up a decoy wallet: Prepare an account that appears to be the main wallet but actually holds only a small amount of assets for emergency situations.
• Strengthen family security management: Family members need to understand basic asset management and response knowledge; set up security codes; enhance the physical security of the residence.
• Avoid identity exposure: do not flaunt wealth on social platforms; manage personal information carefully; avoid disclosing information about holding encryption assets in real life.

Conclusion

With the rapid development of the encryption industry, KYC and AML systems play an important role in enhancing financial transparency. However, challenges remain in data security and user privacy protection. It is recommended to introduce a dynamic risk identification system based on traditional KYC processes to reduce unnecessary information collection. At the same time, platforms can integrate professional anti-money laundering and tracking services to enhance risk control capabilities from the source. In addition, strengthening data security capability construction is also crucial, which can be achieved through professional security testing services to comprehensively assess potential risks.