Highlights:
- EigenLayer faces scrutiny after a $5.7M token sale breached lockup rules for early investors.
- A hacker exploited an email flaw to steal 1.67M EIGEN tokens, highlighting security risks.
- Investigations into EigenLayer’s internal compliance and token security are still ongoing.
EigenLayer has been scrutinized for the unauthorized sale of 1.67 million EIGEN tokens. The tokens were reportedly sold using MetaMask, creating major concerns about token security and internal protocol compliance. The sale is believed to have violated EigenLayer’s strict one-year lockup period for employees and early investors.
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Community Update
We are investigating unapproved selling activity associated with this wallet: (https://t.co/Pp9KoTfACp).
We will share our findings with the community as soon as possible.
— EigenLayer (@eigenlayer) October 4, 2024
Arkham Intelligence was the first to detect the suspicious transaction. According to the data, the sale took place using a wallet supported by EigenLayer’s multi-signature Gnosis Safe. Despite being locked up, the tokens, each worth $3.3, were transferred from an EigenLayer team wallet and sold.
This incident has raised concerns about internal oversight at EigenLayer, especially since the transaction appears to have violated the protocol’s lockup policy.
EigenLayer Violated Lockup Schedule Raises Compliance Concerns
EigenLayer’s lockup policy clearly states that current and former workers and early investors are not permitted to sell or stake their EIGEN tokens until September 2025. After that date, just 4% of the recipient’s tokens will unlock monthly, with complete vesting expected for September 2027.
Given that EIGEN coins were just airdropped beginning May 10, 2024, the wallet used in the sale was still under its one-year lockup term. This raises issues about the protocol’s internal compliance procedures and token security features.
The sale also coincides with a rise in the market capitalization of EigenLayer’s token. EigenLayer’s token was unlocked on October 1. It quickly joined the top 100 tokens based on market valuation, with a fully diluted market capitalization of $7.2 billion.
EigenLayer Hacker Attack Exposes Vulnerabilities
EigenLayer revealed that a hacker exploited a security flaw, leading to the transfer of 1.67 million EIGEN tokens. According to the protocol, an investor’s email detailing a token transfer to a custodian address was hijacked by a malicious actor.
The hacker replaced the address in the email, redirecting the tokens to their wallet. The attacker first received one token before transferring the remaining 1,673,644 EIGEN tokens 26 hours later, all from a multi-signature address. The stolen tokens were laundered through several platforms, including HitBTC, with the majority of the funds being converted to stablecoins such as USDC and USDT.
Response and Impact on Token Security
Following the attack, EigenLayer assured users that the incident was isolated and not indicative of a broader vulnerability within the protocol. The team emphasized that the security breach was limited to the compromised email, and no vulnerability was found in the protocol’s core infrastructure.
However, the sale and subsequent attack have drawn attention to the security risks surrounding token vesting and distribution. The EigenLayer team has stated that they are working closely with blockchain security firms to investigate the breach and prevent future incidents.
Industry Experts Weigh In
The situation has prompted several reactions from different personalities within the crypto space. In his tweet on X, Coinlist CEO Raghav Gulati explained that having fair pre-launch pricing and vesting schedules is crucial. Gulati emphasized that sale participants and early investors should also be subjected to restrictions similar to those of team members.
Here’s how you launch a hyped, legit token (sorry @eigenlayer missed this window, but everyone else can learn):
1. The community needs to feel like they’re insiders. Do an aggressive inside sale for the best community members at an aggressive discount to last round. I’m talking…
— raghav (@rargulati) October 6, 2024
Investigations Ongoing
Investigations into the unauthorized sale are still ongoing. Blockchain security firms, including Lookonchain, have been actively involved in tracing the movement of the tokens.
EigenLayer has promised to provide further updates as more information becomes available. This incident has highlighted the challenges that protocols like EigenLayer face when managing token security and internal oversight.
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