Swan Bitcoin on the Defensive Following Fortress Hack

  • Swan denies customers’ funds were lost in the Fortress hack.
  • The company has a range of security measures to prevent asset loss.
  • Ripple acquired Fortress and made whole customer losses. 

Cryptocurrency hacks continue to plague the industry, undermining trust across the board. Blockchain security firm Peckshield underscored the scale of the problem by reporting that more than $3 billion was stolen by hackers in 2022. 

Infrastructure firm Fortress is the latest to fall prey to hackers, following the disclosure last week of a third-party API security breach in which an undisclosed amount was stolen. In the fallout, Swan Bitcoin, which uses Fortress for custody purposes, denied being affected by the hack.

Swan Assures Customers

Swan has addressed concerns that the Bitcoin stolen in the Fortress hack was siphoned from user holdings. A post from the company’s X account stated that, during the hack, Swan customers’ coins were safely held in cold storage with sub-custodian BitGo.

The tweet further sought to reassure customers that Swan utilizes various security procedures, including video calls, physical access, and on-chain visibility, to prevent asset loss. 

Swan managing director Steven Lubka explained that the “tri-party” model, involving Swan, Fortress, and BitGo, was implemented after the Prime Trust incident and required daily reconciliations between all parties and BitGo’s approval to authorize transfers.

Prime Trust filed for bankruptcy in August following a string of controversies that culminated in Nevada regulators placing the firm in receivership, which refers to a remedy for secured creditors to recover amounts owed. Prime Trust was Swan’s custodian before Fortress’ appointment, leading to Swan being heavily panned over the association, with this latest incident doing little to reassure Swan users that things have changed. 

Meanwhile, BitGo CEO Mike Belshe wasted no time joining Swan to distance his company from the fallout of the security breach.

Fortress Breached

Belshe took Swan’s lead, clarifying that BitGo was also unaffected by the hack. The BitGo CEO posted a lengthy tweet detailing his disappointment with Fortress on numerous counts, highlighting that the firm minced words to downplay the incident and suggest that customers had, in fact, not lost funds.

Belshe further revealed that Fortress had contacted BitGo following the hack but ignored their advice to disclose the matter sooner. Fortress went public with the information on September 7, stating that it had suffered a security breach related to third-party API integrations at the end of August. 

Although it mentioned that four customers were affected by the incident, the company did not reveal the amount hackers stole. Fortress was subsequently acquired by Ripple, which paid to cover the resulting losses from the hack.

On the Flipside

  • Swan’s Bitcoin maximalist principles clash with Ripple being the ultimate custodian of its customers’ BTC.
  • Prime Trust and Fortress were both founded by Scott Purcell, a fact Swan was doubtless aware of.

Why This Matters

While Swan customers may have escaped unscathed, the Fortress hack has reignited doubts about Swan’s partner selection process and due diligence procedures.

Discover the details behind the most expensive Bitcoin transaction fee ever recorded here:
User Pays $500,000 for a Single Bitcoin Transaction: Details
Understand Brian Armstrong’s take on the upcoming US presidential election here:
Coinbase CEO: Crypto to Take Center Stage in 2024 US Election

Source link: https://dailycoin.com/swan-bitcoin-defensive-following-fortress-hack/




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