Indian investigations lead to arrest: How internal betrayal caused billions in losses in the crypto industry

A massive security incident at a major crypto trading platform has led to arrests in India and reveals a growing security risk in the industry. The Indian police in Hyderabad detained a former support employee who was part of a bribery scheme affecting thousands of customers and resulting in losses of $400 million.

The Sequence: From Bribery to System Takeover

The scenario appears almost simple at first glance: hackers identified and bribed employees and contractors of a large crypto company based in India. The attack was initiated in May when the intruders managed to gain direct access to internal systems through bribed employees—not through technical exploits. The Chief Security Officer described the approach clearly: “The attackers specifically targeted employees of our Business-Process-Outsourcing and Support teams based in India to persuade them to disclose data.”

What is remarkable about this attack is the method—it is a classic social engineering scenario where human error replaces the firewall. Instead of complex code exploits, the breach was achieved through personal contacts and financial incentives. This was so effective that the attackers had nearly uncontrolled access to customer accounts for months.

Response and Consequences

The affected trading platform announced swift countermeasures after discovering the incident. The CEO posted on platform X that access was immediately blocked once unauthorized data sharing was detected. The arrest of the Indian individual was presented as a sign of a zero-tolerance policy toward security breaches.

Remediation and compensation for affected users could reach up to $400 million—placing this incident among the ten largest crypto security breaches of all time. An additional criminal case in Brooklyn targets another suspect accused of orchestrating a “long-standing identity fraud scheme.”

The Broader Context: A Growing Problem

Similar incidents are increasingly recurring in the industry. In February, a competing trading venue suffered a comparable attack with damages of $1.5 billion. Throughout 2024, losses from crypto security breaches totaled $2.2 billion, according to Chainalysis—a concerning trend for the industry.

Market Reaction and Long-Term Perspective

Stock prices reacted with a slight decline of 1.2% to $236.79. Nevertheless, the affected platform maintains its position as a significant player: it manages the majority of the $122 billion in spot Bitcoin ETF holdings and remains politically influential. As the largest crypto donor in US politics, the company invested over $52 million in campaigns during the 2024 election cycle.

The industry as a whole accounted for half of the nearly $250 million in corporate election donations—a sign of the growing economic and political importance of the crypto sector. Despite current scandals, trust in established platforms remains stable, underscoring the fundamental role of these institutions in the digital financial landscape.