On March 23rd, hackers broke into Axie Infinity's Ronin network to steal Ethereum and USDC stablecoins that were then worth over $600 million. In response to the massive theft, Axie developer Sky Mavis disabled token withdrawal — but apparently not before its CEO moved $3 million worth of Axie's main token, AXS, into Binance. According to Bloomberg, company CEO and co-founder Trung Nguyen made the large transfer mere hours before Sky Mavis disclosed on March 29th that the "play to earn" game was hacked.
It was YouTube user Asobs who first identified the transaction and who shared his documentation with Bloomberg. The news organization then worked with associate professors of mathematics at Winthrop University to confirm his findings. Asobs analyzed the transaction details and connected it to a wallet controlled by Nguyen based on previous transactions, such as the initial distribution of tokens for the game during its early years.
When asked, company spokesperson Kalie Moore has confirmed the transaction to Bloomberg. Moore said Nguyen made the transfer to shore up the company's finances and ensure it could provide liquidity to its users. Nguyen apparently had to do so on the down-low so that people tracking official Axie wallets wouldn't be able to front-run the news and cash out before the rest of the players even find out what's going on.
"At the time, we (Sky Mavis) understood that our position and options would be better the more AXS we had on Binance. This would give us the flexibility to pursue different options for securing the loans/capital require. The Founding Team chose to transfer it from this wallet to ensure that short-sellers, who track official Axie wallets, would not be able to front-run the news."
Nguyen posted a Twitter thread after Bloomberg's report went up and said that his team had been in contact with Binance after the hack was discovered to "ensure user funds would be restored as soon as possible." The executive added: "This discussion included the fact that Sky Mavis would provide liquidity while we worked on a full backing of the bridge." He also called speculations of insider trading as "baseless and false."
This story includes speculation of insider trading. These accusations are baseless and false. In fact, the Founding Team even deposited $7.5M from a known Axie multi-sig wallet TO Ronin Network prior to the bridge closing to avoid triggering any short-sellers watching.
— Trung Nguyen (@trungfinity) July 28, 2022
In Axie Infinity, people can earn cryptocurrency by playing the game and completing tasks, such as winning Arena battles and breeding Axie monsters, which are non-fungible tokens. The attack on its Ronin network is now known as one of the biggest in crypto history. According to previous reporting by The Block, bad actors gained entry into its system by sending a spyware-filled PDF to one employee who thought he was getting a job offer with higher pay from another firm. Turns out the company didn't exist, and the offer, according to the US government, came from North Korean hacker group Lazarus.
Sky Mavis has secured $150 million in funding to help reimburse users since then, and Nguyen said all players' funds are now backed 1:1. The value of Ethereum dropped considerably since March, however, so players will not get the money they could've gotten if they had cashed out months ago. As for the game itself, it opened back up in late June with a new system to flag "large, suspicious withdrawals" and a new land-staking feature that enables players to earn passive income.