The creator of the interconnected blockchain network Cosmos (ATOM) has issued a warning regarding significant security risks associated with the Liquid Staking Module (LSM) of the Cosmos Hub.
According to a statement from Cosmos co-founder Jae Kwon, when developer Zaki Manian started working on the LSM in August 2021, most of the module’s code was written by coders Jun Kai and Sarawut Sanit, who were later connected to North Korea.
Kwon claims that the same North Korean developers were responsible for addressing the vulnerabilities flagged in an Oak Security audit conducted in July 2022.
“This not only compromised the integrity of the remediation process but also allowed the potential authors of the vulnerabilities to either rectify or disguise any intentional flaws they may have introduced, possibly increasing the risk to the system.”
Kwon reveals that in March 2023, the FBI alerted Manian about North Korea’s association with the project. However, instead of informing the Cosmos community, Manian announced in April 2023 that the LSM was set for deployment and moved forward with the signaling proposal to incorporate the LSM into the Cosmos Hub.
By September, the LSM had been integrated into the Cosmos Hub following 19 months of code changes that were never audited.
Kwon emphasizes that the Cosmos governance community must act swiftly, warning that the security vulnerabilities within the LSM could result in severe consequences.
“It is crucial to understand that the LSM is not an independent module but a collection of modifications and extensions added to existing Cosmos staking modules… Therefore, any flaw in Iqlusion’s LSM affecting these core modules could put all staked ATOM at risk, given that liquid staking directly interacts with staked assets.”
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