All Episodes

July 24, 2026 β€’ 12 mins
SecondFi has released more detail on the wallet security incident that saw about 16.1 million ADA, roughly US$2.6 million, withdrawn from 374 wallets between 21 and 23 June. The update includes a public warning about fake recovery emails, findings from Groom Lake's forensic investigation, and a clearer explanation of the cryptographic flaw involved.

Peter breaks down what SecondFi says happened, including the reported external attacker, the possibility of a second separate attacker, the per-transaction signature issue, and why public transaction data may have been enough to derive affected private key material under certain conditions. The episode also covers the wider discussion around cross-chain wallet code, CTRL Wallet, Yoroi migration, EMURGO tooling and the unauthorised publication of relevant code.

The key safety message is simple: use only official SecondFi channels, do not click recovery emails, never share private keys, and wait for audited recovery and migration tooling rather than trusting anyone offering support through emails, comments or direct messages.

Chapters:
0:00 Fake Recovery Email Warning
1:15 Incident Investigation Update
2:18 Second Attacker Identified
2:56 Cryptographic Root Cause
3:45 Signing Formula Breakdown
5:46 Vulnerable Wallet Library
6:37 CTRL Wallet And Yoroi
8:22 Published Code Question
9:14 SecondFi Wind Down
9:34 Recovery And Migration Tools
11:25 Private Key Safety

What you'll learn:
- SecondFi warned users that fake recovery emails are phishing attempts and that official communication is through its X account and technical support channels.
- SecondFi said the June incident involved approximately 16.1 million ADA, about US$2.6 million, stolen from 374 wallets.
- Groom Lake's independent investigation identified an external actor and suggested the primary operation may be linked to the DPRK-linked Lazarus Group.
- The investigation also identified activity from a second separate attacker affecting a different set of wallets during the same window.
- The root cause described by SecondFi was a subtle cryptographic flaw in how wallet software generated per-transaction signatures.
- The signing issue meant data that should have depended on secret information could under some conditions be computed from public blockchain data.
- SecondFi says the flaw has been patched, new wallets created with corrected software are not known to be affected, and the wallet is being wound down.
- SecondFi is preparing safe migration functionality for early August and a zero-knowledge-proof recovery tool targeted for August after specialist third-party audits.

Links & References:
⚠️ Security Alert: FAKE RECOVERY EMAIL:
- https://link.learncardano.io/m7FsGq
Official SecondFi website:
- https://link.learncardano.io/6llK2P
What happened to SecondFi:
- https://link.learncardano.io/fNJfCu
The signing math:
- https://link.learncardano.io/5Pu20K
Vulnerable Library:
- https://link.learncardano.io/cPTJG9
Andrew Westberg's Opinion:
- https://link.learncardano.io/cVwd7C
EMURGO's internal JS framework Dullahan:
- https://link.learncardano.io/0vu7M5
⚠️ Recovery Update: Bounty Offer Made to Attacker:
- https://link.learncardano.io/lG2331

Website: https://link.learncardano.io/bQ68Rc
X/Twitter: https://link.learncardano.io/3a1Qtv

Disclaimer: This content is for educational purposes only. Nothing constitutes financial advice.

DISCLAIMER: This content is for informational and educational purposes only and is not financial, investment, or legal advice. I am not affiliated with, nor compensated by, the project discussed—no tokens, payments, or incentives received. I do not hold a stake in the project, including private or future allocations. All views are my own, based on public information. Always do your own research and consult a licensed advisor before investing. Crypto investments carry high risk, and past performance is no guarantee of future results. I am not responsible for any decisions you make based on this content.

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Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Okay, guys, We've got some updates around the Second five
hack incident and the has now been an investigation to
try and find out who is behind the attack and
where the funds are actually going. So I've got all
the details here for you guys. But first off, just
a public service announcement. If you are seeing emails coming

(00:20):
through attempting to help you and support you through this
hack phase of Second five or EUROI, you will see
that they are phishing attempts.

Speaker 2 (00:29):
There are scams.

Speaker 1 (00:30):
Do not click on any of the links, don't engage
with them, they are all fake. The Second five team
are not communicating via emails. All the communications are being
done via the X account and via their technical support.
You can follow them at x dot com slash Second
five app links down below for you guys, so you
can ensure that you go into the right places. But

(00:51):
you can get to the Second five website Second five
do io and the tools there that you can use
are checker dot Second five and then the second five
app itself where you can download it, and the Second
five app itself. So if you have already that downloaded,
followed the links in there to actually get the support
and submit support tickets to let them know that you've

(01:14):
been hacked. But anyway, let's go through the hack attempts
here and what the initial investigation has found. So between
the twenty first and twenty third of June this year,
Second five experienced that security incident with approximately sixteen point
one million eight being withdrawn from various users' wallets. That's
equated to about two point six million USD and so

(01:37):
on from three hundred and seventy four wallets. Now, this
independent report investigation from groom Lake, it's an independent forensic
investigation to try and work out where the money was going,
looking into the code and everything else around it. But
this is what some of the highlights from this. So
the attacker is an external actor. Obviously, it's someone that

(01:59):
we you may or may not know, but the groom
Lake guys have determined that this may be and may
have come out of the dp DPRK or North Korea
and from the attacking hacker group Lazarus Group, which has
close ties to the North Korean government. And the second

(02:20):
attack here, so it wasn't just one, there was two
separate attacks. So the first one was initiated from the
Lazarus Group, but the second attack here. Groom Lay also
identified activity by a second party attacker that appears to be,
based on current evidence, to be separate from the primary
operations and have affected a different set of wallets during

(02:40):
the same window. Overlap of effected wallets has been identified
to date, so completely different attacker that once they saw
probably what was happening with the wallets and what the
Lazarus group.

Speaker 2 (02:51):
Did, try and probed into.

Speaker 1 (02:53):
The attack and then worked out they could steal funds themselves.
Now what caused the attack? I held back talking about
anything about how the attact worked and how it happened
until teams and everyone that's working in this space could
jump on and mitigate as much as possible and dampen

(03:16):
its effects before talking about it. Now, this is a
root cause. Root cause was a highly subtle flaw in
how wallet software generates per transaction signatures. In simple terms,
a value that should have been derived from a secret
information could, under certain conditions, be computed from public transaction data.

(03:38):
This could enable effect a private key material to be
derived from information visible on public blockchains. Now, I did
have the information about this ages ago, when the vulnerability
just happened, and a couple of people started looking into
what was happening with these transactions, and Jonathan here I
believe his from no Witness Labs. He posted up the

(04:02):
way that the signatures were derived on all the wallets
and basically a breakdown of how it was done and
where the vulnerability happened to be. So essentially, when you're
writing a signature to confirm the transactions, you need a
couple of parts, and one of the parts was completely
emitted from this process, allowing anyone to actually just create

(04:25):
it from that public data trying to find the part
of the formula here that exposed that here we go.
So essentially this part here was the key bit. So
the part here, part K within this equation was emitted
from the signing of the transactions. So you need R
and R is made up of K and G and

(04:47):
G is the public fixed point which is put on
chain which the attackers could see. But this R was
generated without the secret, without the secret that should have
been generated from the un wallet, and without that it
meant that anyone that could see a public transaction with
the G could use it in the R part of

(05:08):
the formula to sign all the transactions. Hopefully that made
sense That's why I said, when anytime you did a
transaction on chain within a compromised wallet, it would have
given them this variable here are because it didn't have
the secret, and because they could just use that same

(05:29):
value over and over again to sign a transaction from
your wallet.

Speaker 2 (05:34):
That's all they needed.

Speaker 1 (05:35):
They had all the information in public on chain itself
to be able to liquidate your wallet. So that's what
happened in this situation. Now people did do a bit
more digging and found out what library and where this
actually came from. And I believe this is correct of

(05:56):
what and where this all came from. And it all
came from a multi chain wallet SDK that allowed bitcoin,
ethereum and kadano or to be wrapped into one single wallet.
And I don't think it's this developer's fault because this
was an experimental library that was being created and didn't

(06:18):
get funding to be completed or audited or anything like that.
And someone used this library to be brought into a
murgo's code base. But I'll go into that a little
bit in a little bit more detail. But this is
where what I believe has happened in regards to how
this vulnerability came into play. Now. Andrew Westberg went in

(06:40):
a little bit deeper here around this analysis, and I
feel the pain that a lot of Kadana people have.
It's easy just to go it was North Korea, it
was the GP the GP ark and just say that,

(07:00):
you know, the big hackers.

Speaker 2 (07:02):
Of the world at the moment are doing this and
that is the root cause of this.

Speaker 1 (07:06):
But let me just read out what Andrew just mentioned here.
The bug originated in XDFI control Wallet that later became
Second five, that later migrated euroy users over to it.
The wallet is a cross chain wallet that supported that's
with support for many blockchains, so that is an interesting

(07:26):
comment there. I didn't see any links directly with control wallet.
We did see the news and announcement that control wallet
was also shutting down, and it looks like this is
potentially where this vulnerability, this exploit all came from. So
whether it was directly from this being included into EURROI
second five, or it was the migration of control Wallet,

(07:49):
which had the same library in there as well. Maybe
they integrated that library on their side and then when
updating to second five, that's where things happen. So I'm
not entirely one hundred per cent sure of those particular details,
but it seems like the exploit all came into when
things were being included into the brand new wallet. Two

(08:12):
million USD worth of funds are definitely liquidated, but you know,
we'll see what happens when the recovery process does start
to happen. Let's go back to the original announcement from
Second five themselves. So this cryptographic flow was also visible
in a copy of relevant code that had been published
without authorization to a public GitHub repository. We are continued

(08:36):
to assess circumstances surrounding the publication and are cooperating with
relevant authorities. So is that their code that was published
online without authorization? Because if that was the case, then
that would make things really easy for anyone else to
probe the Second five app to have access to it.

(08:59):
If it was close, you wouldn't be able to get in.
Of course, you can still socially engineer your way into
a company, gain access that way, and then find the
flaws and vulnerabilities, But in this case, it looked like
it was published online. Hm hm, very interesting. Okay, fixing
and winding down second flight. The floor has been patched.
We all know that at the moment new wallet's created

(09:20):
with the correct software, I'm not known to be affected
by this issue. However, given the gravity of this event
previous announcement that we've made a difficult decision to wind
down Second Fire and your wallet. The asset recovery and
migration safe migration, this is what you're interested in here.
Our current priority is to support affected users, assisting recovery efforts,

(09:40):
enabling users to move their assets securely. Recovery tool this
is where we're at the moment. A secure recovery tool
using zero knowledge proofs is being developed and that is
still being worked on at the moment. Even Charles put
his hat in the ring and deployed some code that
uses ZK proofs to prove that you own a particular
wallet before or during the hack, and then where it

(10:02):
should go now. The portal was designed to allow users
to initiate the process directly while limiting information required to
do so, for example, putting up your keys, say you
don't want to do that, you want to sign something,
use that as zkproof and then say that yeah, that
is my wallet, I want my assets back.

Speaker 2 (10:18):
Okay.

Speaker 1 (10:19):
The tour is currently in testing and we're engaging a
specialist though party orders to review it before our anticipated
release in August, so August. Right now, time recording is
the twenty fifth, so we still have a bit of
time to wait for this one here.

Speaker 2 (10:35):
So I don't know if this is early August or
late August, but.

Speaker 1 (10:40):
Either way, i'd want this order to multiple different times
because we're having assets returned to us, and hopefully during
that return we don't see another tack and we don't
see another hack. So it's that's the main goal here,
safe migration. In the meantime, we are preparing wallet export
functionality designed to allow users to migrate their assets.

Speaker 2 (10:57):
To what of their choice. Anticipate this releasing early August.

Speaker 1 (11:02):
Okay, so save migration sometime in early August, hopefully in
the next couple of weeks, but then recovery tool by
the end of August, so another hopefully this is all
wrapped up within by the end of the month under August,
and that would mean this attack, this whole thing recovered
by a two month period hopefully. That's hopefully the best

(11:24):
case scenario. Anyway, Guys, like I said, make sure you
don't ever expose your private keys online.

Speaker 2 (11:31):
Don't listen to support.

Speaker 1 (11:33):
Help that may appear on x or in the YouTube comments,
even they're all scams. Don't ever expose your private keys online.
Don't ever give anyone your private keys, et cetera, et cetera,
because they are all trying to steal your assets as well,
so be very careful and mindful of that.

Speaker 2 (11:51):
All right, guys, That's what I have for this particular update.

Speaker 1 (11:54):
Unfortunately, I can't tell you that you will get your
funds back tomorrow or anything like that, but hopefully we
do see them back by the end of August.

Speaker 2 (12:03):
Fingers crossed.

Speaker 1 (12:04):
Make sure you keep up to date and follow along
the Second five account to make sure you get to
update information from their team there, or just hit that
subscribe like button down below and I'll keep you guys
up to date with what's happening with the Second five
updates as well. It's a lot to take in sometimes,
but I'll try and keep you guys up to date
with all that YouTube memberships down below buy me coffee

(12:26):
links there a great way to support the channel. Otherwise,
just hit that thumbs up. Stay positive, guys, I'll see
you in the next video.
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