Save on-chain funds stolen from Terraport

Summary
This proposal requests voters to vote to support an emergency code upgrade that will enable the locking of approximately $2m of stolen funds from investors and users of Terraport that are recorded in tracked wallets which have been independently confirmed, thus this being a step closer to helping investors get their funds returned.

Binance are coordinating the investigation into this attack with the authorities. Binance, Simpleswap, MEXC and Kucoin have already collectively frozen approximately £1m of funds in wallets off chain and we expect them to be returned in due course.

By locking these funds it prevents the thieves from moving them off chain and the risk of them being permanently lost. Every minute these are not locked gives the attackers a chance to move them. It also tells criminals that we will stand up for what is right and not sit back and let them get away with stolen funds when it is in our power to prevent this.

If the vote is passed and the funds are locked, we will then consult with the community and present a proposal on how to go about returning the funds to the Terraport liquidity pool. We have chosen to use separate proposals to prevent any lack of focus on this specific proposal which is itself an unprecedented emergency measure for Terra Classic.

Background
On the 10th of April Terraport was the victim of an attack. This attack resulted in the liquidity pool being drained of approximately $4m in value of LUNC, TERRA and USTC combined. This pool was comprised of investor funds. This attack was investigated in a collaborative effort with enforcement authorities and major crypto stakeholders and coordinated by Binance forensic experts. In the UK TerraCVita reported this crime to the police and are communicating with the NFIB.

The investigation team (independent of TerraCVita) consider the group behind the attack is an international group with a long pedigree of attacks across crypto and is omnipresent. TerraCVita considers this not just an attack on Terraport, but an attack on the whole Terra Classic community.

Emergency Measures
CEX’s have cooperated with the investigation team and also the enforcing authorities and have frozen wallets to prevent off chain funds being moved to prevent the attackers benefitting from their ill-gotten gains. These funds are expected to be returned in due course. This therefore leaves the on chain stolen funds that are freely circulating and we believe the attackers are working on finding a way to take them off chain. We believe that it is a matter of time before they are lost for good and this could be a matter of hours or days.

Solution to save on chain stolen funds
The investigation team strongly advised TerraCVita not to publicise any attempts to save any of the stolen funds, because this will prompt the attackers to expedite their efforts and simply fore warn them. Hence it is only now this approach is being publicised for the first time. TerraCVita have had the new L1 code created to save the funds prepared for a few days and have been discreetly consulting with community stakeholder and with validators in a ‘validator discord’ that is used to seek consensus on issues of security concerning the chain. Typically, this approach is used for code vulnerabilities.

On a community focussed volunteer basis, Frag and Vinh have created, reviewed and tested the code, and this has been done outside of their ‘Community Pool funded hours’ as they wanted to show willing to work with the community to solve community problems. We are not the only team to have proposed this approach with other validator teams and developers independently approaching us with this solution.

A precedent situation
We are in a unique situation. We have the ability just like the CEX’s to protect the community from thieves, and to say to the criminal world, we will not turn a blind eye to criminals, and we will not allow criminals to benefit from their activities. We are also in a changing Defi and blockchain landscape where pressures to KYC users and increasing pressure for legislation are upon us. We have an opportunity to showcase to traditional finance and law enforcement stakeholders that the block chain can keep its own house in order and is actually more effective than traditional finance at protecting consumers and fighting crime.

If the community and validators approve this, we believe this will be a good marketing opportunity for our chain and give the crypto users increased confidence in the robustness of how Terra Classic is governed and how much support we have for the community and the law.

TerraCVita
As a developer group TerraCVita has free of charge saved investors hundreds of thousands in stolen funds through preventing undelegation scams, have helped validators get established and also helped dApps get a foot hold towards sustainability. We have never received community pool funding and Terraport is privately funded, and we have always stood up against misuse of funds. We also run a validator and market TerraCasino one of the largest dApps in crypto helping to burn millions in LUNC.

We are committed to protecting and supporting the community and those positively contributing to the ecosystem and helping to revive Terra Classic and Terraport is designed to aid deliver this. As a Decentralised exchange it allows trading of LUNC pairs, which we intend to increase to be the largest provider of LUNC trading pairs and to draw investment into LUNC, and through providing a launchpad for projects we aim to help as many as possible launch sustainably bringing life to Terra Classic. We would like to consider this passage demonstrates that TerraCVita has a track record as a rock and provider to the chain, however now we reach out humbly to the community we serve for assistance which we hope we have earned.

Preventative Measures
Since the attack we have created a security/compliance position, we have reviewed KYC of all code contributors, independent developers have conducted an initial status review of our code and we have hired CertiK to conduct an additional in depth third party review of all current code used in Terraport and we intend to use them for all future upgrades. The authorised Terraport code was not the attack vector in this instance. We are also lobbying to improve measures across the whole of crypto to improve measures to reduce the likelihood of successful criminal attacks.

Once funds are secured this will give us time to propose an acceptable way to return the funds and we suggest a full proposal through agora to give the community a chance to be consulted and to vote on what happens to these funds.

Proposal
The proposed code patch is available for perusal by contacting the Joint L1 task force. To reduce the chance of forewarning the attackers the list of addresses is kept current and confidential because once the new binary is unanimously deployed, it is very hard to change again. The blacklist addresses will be hardcoded into source code so that no change to store is made. Due to this, an upgrade proposal is not required. We will minimise the time on Agora purely because the longer this is advertised the greater the chance the attackers will escape with the funds. Time is absolutely of the essence.

I hope you will agree that this is an acceptable solution and vote ‘yes’ to agree to the security patch and to save the community investor funds. If there is a vote “yes”, all running nodes must change to the new binary instantly at the end of the voting period / when deployed.

Any other vote will increase the chances of the stolen funds being lost forever and will in effect turn a blind eye to criminal activity and reduce the likelihood of LUNC recovery.

18 Likes

Yes, yes YES!

11 Likes

So,when are we getting our crypto back that was stolen? I really hope that Terraport will recover from this disaster.

5 Likes

I don´t really see how this is a Lunc issue :man_shrugging:

17 Likes

So they’re working on LUNC-related initiatives prior to said initiatives having passed governance?

Oh, how lovely.

1587931999115

As much as I support the returning of funds to victims, you’re basically asking the LUNC community to clean up your personal mess. Terraport was a private dApp, it doesn’t belong to LUNC holders, nor should the chain twist itself backwards to help you clean up your personal fuckup, Rexyz. You didn’t do the code audit, you ignored all the warnings, and you released a sloppy product that then got hacked (… and now you want the rest of us to help you mop it up.

Oh for f*ck’s sake, THIS ISN’T YOUR PRIVATE BLOCKCHAIN!

STOP TRYING TO CENTRALIZE DECISION-MAKING AND HIDE CRITICAL INFO!

Christ almighty, do you even realize what you’re asking for?

Lmao.

No, clean up your own goddamn mess!

How about you release Terraport’s source code first, then we’ll talk?

NO WITH VETO :-1: :-1: :-1: :-1: :-1:

26 Likes

Strongly Oppose:

1.So far, whether Terraport misappropriated assets or was under attack only exists in one-sided sources, and there is no confirmation from any reliable organization that they are victims. Although we have no evidence to prove that TCV is malicious, there also seems to be no evidence to prove TCV’s innocence. In other words, TCV itself is still a suspect.Would you allow such a team to deploy black-box code on the chain?

2.Even if there is concrete evidence proving that TCV is innocent and the victim, deploying unaudited black-box code on a chain worth $600 million is still an extremely dangerous thing. Who will be responsible for the $600 million market value? L1? Obviously, they do not have the ability to bear the consequences.

Therefore, I strongly oppose and veto this proposal. I hope everyone will consider this carefully.

7 Likes

This is a very dangerous and disturbing method you are suggesting. No one should blindly say yes to this thinking it protects the funds of those scammed. This goes against the entire premise of crypto. I was apposed to the whitelisting of wallets for the reason that the next step is blacklisting wallets. The next step is forced KYC and now we are a CBDC were jackasses that won the popularity contest can dictate your wallets. I am no with Veto. Rexy your group and you personally are legally liable for the funds your group lost its investors. But to walk down this road will make LUNC non investable to the crypto world.

Heed this warning. I would love nothing more then to see those effected returned the money they were scammed out of. But this is not the way.

10 Likes

Hey @Tonu_Magi you got something to say to this too? :sunglasses:

Actually the fixes are already applied. I haven’t reported it yet. That’s all.

They have already included the function to freeze accounts in the code.

I wanted to see whether they report it or I need to.

Nah. Fix your own mess. LUNC ain’t nothing to do with it.
NO WITH VETO.

7 Likes

Yes, I agree and we should keep this feature always ready to block anyone who does OnChain scams, many people lose money every day on this network and every LUNC stolen is damage to the entire Terra Classic ecosystem.
Let’s recover these funds and restart this platform stopped at the start.

5 Likes

No with veto. It’s your fault, not the chains. Incredible arrogance to demand something like that. It’s just disgusting and outrageous.

6 Likes

The lunc community has nothing to do with your mess and your sloppy work
What next are we going to blacklist people that oppose certain proposals or say mean words
Voting NO with VETO since this will set a dangerous precedent for the chain!

6 Likes

Adding an emergency code upgrade to LUNC (or any cryptocurrency) to freeze wallets on demand could be perceived as a bad idea for several reasons:

Centralization of control: One of the primary objectives of cryptocurrencies is to enable a decentralized financial system. Implementing a feature to freeze wallets on demand would introduce centralization of control, potentially undermining the core principles of decentralization and trustlessness.

Potential for abuse: Granting the power to freeze wallets on demand opens up the possibility of misuse or abuse by those with access to the feature. It could result in biased decision-making, censorship, or even malicious freezing of accounts.

Security concerns: Introducing an emergency code upgrade could inadvertently create new security vulnerabilities or bugs in the protocol. If this feature is not implemented with utmost care, it might become a potential attack vector for hackers to exploit.

Loss of user confidence: Implementing a feature that can freeze wallets on demand could lead to a loss of user confidence in the cryptocurrency. Users may become reluctant to adopt or continue using the currency, fearing that their funds could be frozen without their consent.

Slippery slope: If an emergency code upgrade is added to address one specific issue (such as the Terraport hack), it could set a precedent for future incidents. This might lead to increased pressure to implement similar measures in response to other crises, gradually eroding the decentralized nature of the system.

Responsibility: The LUNC community may not be responsible for sorting out the mess created by a third-party application like Terraport. It might be more appropriate for the affected parties to pursue legal remedies or work with law enforcement to recover lost funds, rather than relying on the LUNC community to intervene.

Community consensus: Cryptocurrency networks are typically governed by community consensus. Implementing an emergency code upgrade to freeze wallets on demand might not gain the necessary support from the community, leading to disagreements or even forks in the network.

While adding an emergency code upgrade might seem like an attractive solution to the immediate problem, it could have unintended consequences that undermine the core principles of cryptocurrencies and damage user confidence. It’s essential to consider the broader implications and carefully weigh the pros and cons before implementing such a feature.

18 Likes

I don’t understand how you can suspect TCVs. A proposal of this kind blocks the funds and wants to try to bring them back to their place. That is nonsense. Voting NO, on the other hand, means being complicit in theft.

4 Likes

No with veto. As far is i know TCV might be the scammers themself. Dubious things and lack of transparancy from the start. This whole thing smells. Clean up your own mess. This has nothing to do with Lunc.

9 Likes

Yes, but nodes need to apply them.
So it’s not live until then.

2 Likes

This post was flagged by the community and is temporarily hidden.

17 Likes

There is NO REASON to vote “no” unless you are the one who drained LP from Terraport and trying to get some profit out of it. Blacklisting the ‘hacker’'s address does not mean Terraport taking advantage from stolen tokens.

5 Likes

Not with Veto. Your shit, you clean up yourself, it’s not lunc’s business

9 Likes

Fine fine. Let’s all be a little logical. We can tr(Ash them all we want but these funds are required to be stopped from moving out of the chain. We might need to support this even if the change has been done directly.

If the L1 Team has done the change (which I have seen with my eyes that Vinh and Frag have done it) then it’s safe. They probably know what they are doing.

What I would request for is that this function to be removed after this work is over. No one has given anyone else the right to freeze someone else’s account on this chain. That is needed to be done by passing a vote.

In this special circumstance, and ONLY in this case, should we allow this.

This, we are not taking responsibility for. If they wanna do that and their customers wanna support that, they can, but please don’t drag us into this.

1 Like