Crypto exchange Unocoin said on Nov. 13 that disputed wallet transfers were signed and broadcast outside BitGo, even as a freeze was placed on its BitGo enterprise account and had, to date, remained effective.
The exchange halted all services on Nov. 9 after detecting additional unauthorized activity. It had requested freezes on its enterprise accounts at BitGo and Fireblocks after first detecting the activity on Nov. 6.
In its incident update, Unocoin said a backup mechanism intended to preserve access to funds if BitGo became unavailable appeared to have been exploited. The company said it was still investigating how that mechanism was used, the associated cryptocurrency losses, and any potential information exposure.
Two of three keys must sign2of 3One backup key is not enough.The pairing determines whether BitGo participates.
Two of three keys must sign2of 3One backup key is not enough.Two keys must sign together.
Compare documented signing routes
Compare documented signing routesNormal signingUser + backup recovery
The user and BitGo keys sign. BitGo participates, and its withdrawal policies apply.
Normal signing routeTwo selected keys connect to one on-chain transfer. The user and BitGo keys sign; BitGo withdrawal policies apply.User keyBitGo keyBackup keyNot usedOn-chain transferBitGo withdrawal policies applyNormal signing routeTwo selected keys connect to one on-chain transfer. The user and BitGo keys sign; BitGo withdrawal policies apply.UserkeyBitGokeyBackupkeyNot usedOn-chain transferBitGo withdrawal policies apply
The user and backup keys sign without BitGo. Its withdrawal policies are bypassed.
User and backup recovery routeTwo selected keys connect to one on-chain transfer. BitGo does not participate and its withdrawal policies are bypassed.User keyBitGo keyBackup keyNot usedOn-chain transferBitGo withdrawal policies bypassedUser and backup recovery routeTwo selected keys connect to one on-chain transfer. BitGo does not participate and its withdrawal policies are bypassed.UserkeyBitGokeyBackupkeyNot usedOn-chain transferBitGo withdrawal policies bypassed
A provider’s withdrawal controls do not cover every combination of keys that can sign a wallet transaction.
General BitGo documentation, not a reconstruction of Unocoin’s incident. The exact keys and process used in that incident remain unestablished by this diagram.
The recovery capability preserves access when the provider is unavailable and helps explain why an account freeze cannot be treated as a blanket restriction on every transaction that the wallet’s keys can sign.
Unocoin reported identifying outgoing transactions on Nov. 12 from an Ethereum address within its BitGo wallet infrastructure used to fund ERC-20 tokens. Its Nov. 13 explanation attributed the disputed activity to external signing, while the suspected misuse of backup access remains under investigation.
In the Nov. 12 report, Unocoin said more than 90% of customer cryptocurrency funds were maintained in cold storage. It was still establishing the complete status of holdings and potential exposure, so that statement did not settle the loss assessment.
Unocoin’s latest update said work to restore services continued. Unresolved questions include how the suspected recovery path was accessed, what losses or information exposure resulted, and when services can resume.
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