Hacker Wallets Lose Over $13 Million in Ethereum Amid Market Volatility

Executive Summary

Six hacker wallets lost over $13.4 million by panic-selling Ethereum at the market bottom during the October 10 crypto crash and subsequently rebuying at higher prices.

The Event in Detail

Blockchain analytics firm Lookonchain reported that six hacker wallets collectively lost over $13.4 million through poorly timed Ethereum transactions. During a significant market downturn on October 10, these wallets sold 7,816 ETH at an average price of $3,728, totaling approximately $29.14 million. This action locked in an initial loss of $3.37 million on that specific round of trades. Following the market rebound, the same entities repurchased 7,816 ETH at a higher price of $4,159, exacerbating their overall financial deficit. The transactions were primarily conducted through CoW Protocol. This event is not isolated, as previous data indicated that these hackers had purchased 9,240 ETH valued at $39.45 million when the token traded near $4,269. Subsequently, they sold 8,638 ETH for $32.5 million at $3,764 per coin as prices declined, resulting in a loss of $5.5 million on those specific trades. The combined losses from these transactions pushed the total deficit for the six wallets to over $13 million within a few days.

Market Implications

The actions of these hacker wallets coincided with a broader cryptocurrency market correction. On October 10, the total crypto market capitalization plummeted from approximately $4.24 trillion to as low as $3.74 trillion, shedding an estimated $450 billion to $560 billion. This downturn led to unprecedented liquidation events, with $19 billion in leveraged crypto derivatives positions liquidated within a 24-hour window, affecting approximately 1.6 million traders globally. The market also saw its total capitalization dip below the $4 trillion mark on multiple occasions. This incident underscores the high volatility and unpredictable nature of crypto markets, affecting all participants, including illicit actors. The market's reaction to pervasive illicit activity is often observed as cautious sentiment, leading to decreased trading volumes in certain riskier assets or a preference for well-established cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) over newer altcoins.

Expert Commentary

The incident has prompted discussions within crypto circles regarding the trading acumen of sophisticated cybercriminals. Analysts suggest the repeated pattern of buying high and selling low indicates either a poor trading strategy or a potential attempt at money laundering through wash trading. Wash trading involves simultaneously buying and selling an asset to create misleading activity and inflate trading volumes, a practice seen in cases such as the FBI's NexFundAI operation which exposed market manipulation on platforms like Uniswap. Blockchain analytics firms like Lookonchain and Elliptic utilize sophisticated forensic tools to monitor transactions, assign risk scores, map wallets to exchanges, and analyze transaction graphs to identify complex money laundering structures and behavioral patterns. These tools are crucial for tracing funds and detecting illicit activity, differentiating normal network behavior from suspicious conduct.

Broader Context

Illicit crypto activity continues to represent a significant financial challenge. In 2024, an estimated $14.5 billion was stolen through scams and fraud, marking a 23% increase from the previous year, with projections suggesting even higher figures for 2025. The total volume of illicit activity is projected to exceed $51 billion by 2025. This alarming trend erodes investor confidence, particularly among new entrants and institutional players, contributing to a cautious market sentiment and a higher 'risk premium' for crypto investments. Despite the use of obfuscation methods like mixers and privacy wallets, analysis by Elliptic indicates that Virtual Asset Service Providers (VASPs) remain the primary initial destination for illicit funds, accounting for 76% of scam proceeds in 2024 and 80% so far in 2025. This presents an opportunity for VASPs and compliance teams to disrupt laundering operations and enhance the security of the wider crypto industry through advanced behavioral detection and investigation tools.