Hackers Steal $3.05 Million in XRP: Funds Traced to Southeast Asian Crypto Laundering Network
A staggering $3.05 million worth of XRP was stolen from a cold wallet in a sophisticated cyberattack, with the funds eventually traced to a crypto-laundering operation based in Southeast Asia. The theft, which took place on October 12, involved the compromise of a hardware wallet that was inadvertently converted into a hot wallet due to a critical user misstep.
The incident came to light through an investigation by renowned blockchain sleuth ZachXBT, who shared his findings on October 19. According to his analysis, the victim—an individual based in the U.S.—had stored 1.2 million XRP in an Ellipal hardware wallet. Ellipal promotes itself as a cold wallet provider, designed to keep assets offline and secure from internet threats. However, the victim unknowingly exposed themselves to risk by importing their wallet’s seed phrase into the Ellipal mobile application.
This action inadvertently connected the wallet to the internet, effectively transforming it into a hot wallet and making it susceptible to remote attacks. ZachXBT emphasized that importing a seed phrase into any internet-connected application undermines the entire purpose of cold storage, leaving the funds vulnerable to theft.
Once the attackers gained access, they initiated a series of over 120 transactions using the Bridgers cross-chain bridge protocol. Through Bridgers, the stolen XRP was converted into TRX (Tron’s native cryptocurrency). While the transactions initially appeared to point toward Binance, they were actually routed through Bridgers’ liquidity mechanisms, obscuring the final destination of the funds.
After the conversion and obfuscation process, the hackers consolidated the assets into a single Tron wallet. From there, they used over-the-counter (OTC) services and channels associated with Huione, an illicit online marketplace originating in Southeast Asia. Huione has previously been linked to various criminal activities, including pig-butchering scams, large-scale money laundering, and cybercrime. It has also been the target of U.S. government sanctions for facilitating the movement of illegally obtained cryptocurrencies.
The case highlights critical vulnerabilities in self-managed crypto storage, particularly when users fail to understand the tools they are using. Cold wallets offer enhanced security only if they remain disconnected from the internet. The act of importing a seed phrase into a mobile app, even one from the same provider, dramatically increases exposure to potential breaches.
This incident also demonstrates the increasing sophistication of laundering operations in the crypto space. By leveraging cross-chain bridges, decentralized exchanges, and OTC desks, cybercriminals are able to mask their tracks and move large sums of stolen digital assets across multiple networks and jurisdictions.
The attack serves as a cautionary tale for crypto holders, especially those who trust cold storage solutions without fully understanding their limitations. While hardware wallets are considered one of the safest options for cryptocurrency storage, their effectiveness is entirely dependent on proper user handling. Misconfigurations or misuse—particularly involving seed phrases—can render even the most secure setup vulnerable.
In light of this breach, cybersecurity experts are urging crypto owners to revisit their storage practices. Key recommendations include never importing seed phrases into online or mobile applications, using air-gapped devices for storage, and periodically reviewing wallet permissions and activity logs.
Moreover, the role of cross-chain bridges in facilitating money laundering is increasingly under scrutiny. Although these tools are essential for interoperability in the decentralized finance (DeFi) ecosystem, they are often exploited by bad actors due to their lack of oversight and regulatory controls.
Authorities are also increasingly concerned about platforms like Huione that operate in legal gray zones across Southeast Asia. These marketplaces, often linked with underground financial networks, provide a haven for laundering illicit crypto assets through OTC trades and peer-to-peer exchanges. Despite sanctions and international pressure, enforcement remains a challenge due to the decentralized and anonymous nature of these transactions.
The crypto community has called for stronger wallet education, urging wallet manufacturers to improve user onboarding and provide explicit warnings about the consequences of importing seed phrases into internet-connected devices.
Blockchain analytics firms are also stepping up, offering enhanced tracing tools to track suspicious flows across chains. While these tools can identify laundering patterns, they often rely on collaboration with exchanges and law enforcement to freeze or recover stolen funds.
In the broader context, this case underscores the growing tension between user autonomy and security in the digital asset space. As more individuals adopt self-custody in the wake of centralized exchange collapses, ensuring they are equipped with the right knowledge becomes more critical than ever.
Ultimately, the theft of $3.05 million in XRP is not just a story of lost funds—it’s a stark reminder of the high stakes involved in managing digital assets and the sophisticated tactics cybercriminals now employ to exploit even minor lapses in wallet security.