Founder of DeFiance Capital Becomes Latest NFT Cybercrime Victim

Key Insights:

• In a hot wallet attack, Arthur Cheong, DeFiance Capital founder, loses more than $1.5m.
• Illicit activity across the digital asset space has forced regulators into action.
• The hack comes at a time of increased vigilance, as governments look at ways to stop Russia from circumventing sanctions.

It’s been a busy first quarter for the crypto market and NFT space. A surge in NFT trading volumes drove more mainstream players to enter the digital space and the Metaverse.

While interest has spiked, illicit activity has also been on the rise. Concerns over Russia circumventing sanctions have forced increased government scrutiny in digital assets.

Arthur Cheong Becomes Latest Hot Wallet Hack Victim

This morning, news hit the wires of yet another hot wallet hack, bringing NFTs back into the spotlight.

Arthur Cheong (“Arthur Ox”), the founder of DeFiance Capital, announced becoming the victim of a hack on Twitter. In a now-deleted tweet, Cheong stated,

“Well this hit me hard but if I got exploited as a fairly sophisticated 5 years crypto user (DeFi user, password manager, mostly hardware wallet). I’m not sure how I can persuade most normal people to put a substantial part of their networth onchain anymore (sic)”

The Defiance Capital Founder requested the blacklisting of his address.

According to today’s report, some of the Azuki NFTs sold on the OpenSea marketplace.

The community responded to the Cheong tweet, tweeting a warning against placing bids or buying NFTs from the hacked address.

ATTENTION ALL @AzukiZen it seems sadly @Arthur_0x wallet has been hacked please do not bid or buy any of these NFTs from this address!!! pic.twitter.com/SsdKt8otis

— StockEd NFT's (@robbyhammz) March 22, 2022

Illicit Activity Continues Despite Increased Government Scrutiny

The NFT marketplace has seen a marked increase in illicit activity. In December, a famous art gallery owner, Todd Kramer, had an NFT collection stolen from his hot wallet. Worth a reported $2.2m, OpenSea froze the stolen assets. The collection consisted of 16 Bored Ape and Mutant Ape NFTs.

Both Todd Kramer and Arthur Cheong were victims of hacks due to storing NFT collections in hot wallets. Hot wallets connect to the internet. By contrast, cold wallets are not connected to the internet and protect digital assets from cybercriminals.

For OpenSea, it was yet more unwanted news. In January, OpenSea refunded 750 ETH to users who had succumbed to NFT exploits.

Illicit activity has risen at such a pace that NFTs have become a cause of concern for regulators and governments.

Earlier this month, the Chinese government targeted NFTs and the Metaverse to curb illegal fundraising.

UK government members of Parliament (MPs) called for more stringent regulations on cryptos and NFTs at the start of the year.

The latest hack also coincides with governments warning of Russia using digital assets to circumvent sanctions.