Kraken’s CSO confirms CertiK returned funds with a ‘small amount’ lost to fees

Kraken and CertiK fought it out on the battleground of Crypto Twitter earlier this week. 

On Wednesday, Kraken said it had received a bug bounty alert from a security researcher to address a bug allowing users to fake their account balance on Kraken. The security team, according to Chief Security Officer Nick Percoco, quickly addressed the issue — quickly, meaning that the team apparently solved it in 47 minutes.

The researcher who flagged the issue shared the bug with two colleagues, and they withdrew roughly $3 million from the Kraken accounts after the first researcher proved the bug by crediting their account with $4.

“After patching the risk, we thoroughly investigated the situation and quickly discovered that 3 accounts had leveraged this flaw within a few days of each other. As we dug deeper, we noticed that one account was KYC’d to an individual who claimed to be a security researcher,” Percoco said.

Percoco’s thread also alleged that CertiK insisted on a meeting between the business development team and Kraken. 

A Kraken spokesperson told Blockworks that they’re “disappointed by this experience and are now working with law enforcement agencies to retrieve the assets from these security researchers.”

(Earlier Thursday, Percoco confirmed the funds were returned, though a “small amount” was lost due to fees.)

CertiK then came out as the security researchers, and now there are a lot of questions. For example, the two can’t seem to agree on the amount. CertiK maintains it never refused to return the funds (Percoco claimed they did, calling it “extortion”) but that the total amount “differs from what Kraken commanded.”

“After initial successful conversions on identifying and fixing the vulnerability, Kraken’s security operation team has THREATENED individual CertiK employees to repay a MISMATCHED amount of crypto in an UNREASONABLE time even WITHOUT providing repayment addresses,” CertiK wrote in a post on X.

The differing narratives caused a stir on X, with various folks weighing in on the series of events. Overwhelmingly, the X crowd seemed to be skeptical of what CertiK was saying, though they did provide a timeline and alleged receipts of the transactions.

Coinbase director Conor Grogan also pointed out that the US-based firm used Tornado Cash for some of the transactions. CertiK didn’t return my request for comment on this.

---

Get the news in your inbox. Explore Blockworks newsletters:

• The Breakdown: Decoding crypto and the markets. Daily.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• 0xResearch: Alpha directly in your inbox.
• Lightspeed: All things Solana.
• The Drop: Apps, games, memes and more.
• Supply Shock: Bitcoin, bitcoin, bitcoin.