Bybit demands 44.67 ETH back from Paraswap DAO, citing hacker’s swap fees

Cryptocurrency exchange Bybit has formally requested that Paraswap DAO return 44.67 ETH (approximately $114,000) in transaction fees collected when the platform’s $1.4 billion hacker used the DEX to swap stolen funds.

According to Bybit’s proposal, the fees were generated when North Korea’s Lazarus Group swapped stolen stETH for ETH using Paraswap. The transaction was carried out in eight separate transactions following the February 21 attack. These funds were automatically collected as standard protocol fees and later wrapped into wETH.

Bybit proposal highlights new details

The Paraswap proposal presents new technical insights regarding how the February 21 Bybit hack was carried out. Bybit specifically emphasized how the stolen funds were laundered through decentralized exchanges.

The transaction consisted of eight individual Ethereum transaction hashes where the hacker traded stolen stETH for ETH on Paraswap.”These funds were originated when the hacker swapped stETH for ETH on ParaSwap,” states the proposal. They referenced transaction IDs that can be verified on-chain.

Based on the latest report by Zhou, the hackers used THORChain to swap ETH for BTC, 361,255 ETH (or approximately $900 million) to be exact. This means that 72% of the stolen funds were moved through this cross-chain protocol. The remainder were moved through OKX’s web3 wallet (8%) and ExCH (16%), the latter sum being characterized as having “gone dark.”

Zhou explained that 83% of the pilfered and converted money to Bitcoin is now distributed in 6,954 wallets, with each containing 1.71 BTC.

Community debate comes up regarding precedent and DeFi principles

The Bybit proposal has initiated a governance discussion among the Paraswap community. Members have begun to put forward opposing opinions on whether refunding the fees aligns with fundamental DeFi philosophy. Some are in favor of the moral argument of refunding money in the context of a hack, while others are concerned that this sets bad precedents for protocol self-governance.

One user pointed out a conflict between the principles of decentralization and solidarity: “From an ethical standpoint, returning the 44.67 wETH to Bybit can be seen as an act of solidarity and good faith, strengthening trust between centralized and decentralized platforms.” But the same user warned that “from the perspective of decentralization and cypherpunk principles, this restitution could be problematic.”

Some of the governance stakeholders inquired about how the community would deal with such incidents in the future. They suggested that a policy be made and not deal with each case on a case-by-case basis. One of the users asked for proof that the proposal was actually made by Bybit. The community has asked the Paraswap Foundation and Laita Labs to confirm whether there has been any official communication with Bybit.

Nevertheless, at the time of writing it is not certain if the communication has been done by the official Bybit exchange. The community has called on the Paraswap Foundation and Laita Labs to confirm whether any official communications with Bybit have happened. However, at press time it is unclear whether the communication has been made by the official Bybit exchange.

Paraswap named as one of the top 3 players by Ben

According to Ben Zhou’s status update, the exchange has implemented a bounty program that has already achieved partial success in freezing stolen assets.

“$2,178,797 USDT has been paid out to 11 bounty hunters,” Zhou reported. Interestingly, Paraswap is named among the “top 3 players” helping Bybit freeze compromised funds. This shows that the protocol has already assisted in recovery efforts separate from the current fee return request.

3.4.25 Executive Summary on Hacked Funds:
Total hacked funds of USD 1.4bn around 500k ETH, 77% are still traceable, 20% has gone dark, 3% have been frozen.
Breakdown:
– 83% (417,348 ETH, ~$1B) have been converted into BTC with 6,954 wallets (Average 1.71 btc each) . This and…

— Ben Zhou (@benbybit) March 4, 2025

The following days are highly crucial to recover lost money. Zhou has indicated that this week and next week are decisive for fund freezing since the funds will begin clearing at exchanges, OTC, and P2P.

Bybit’s proposal to Paraswap stipulates certain “goals and means” of the return of the requested funds. The exchange suggested that, upon approval, the funds are to be immediately frozen from any DAO distribution processes and then transferred into the recovery wallet.

The exchange also responded to the community’s verification concerns: “To ensure the address being sent belongs to the Bybit team, separate communication will be shared from an official communication channel.”

Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More