Disgruntled Engineers Cause $1.4 Million Cryptocurrency Loss for Kronos Research

• Kronos Research, a top cryptocurrency trading team, suffered a $1.4 million loss due to code tampering by disgruntled engineers.
• Engineers manipulated trading simulation code leading to detrimental investment decisions in virtual currencies.

In a surprising turn of events, Kronos Research, a prominent name in cryptocurrency quantitative trading, suffered a substantial loss of $1.4 million in 2020. This cryptocurrency quantitative trading team, known for its global ranking in the top five, faced this setback due to deliberate code manipulation by two engineers within the company. This incident highlights the vulnerabilities within the blockchain ecosystem even among reputed entities.

The core of the issue lies in the actions of two engineers who were discontented with Kronos Research for not fulfilling their promised bonuses. In retaliation, these engineers tampered with the code responsible for simulating trading environments and predictive analysis. This act of manipulation had cascading effects, leading to suboptimal investment decisions within the realm of virtual currencies.

Court documents reveal a sophisticated plan devised by Mr. Chen and Mr. Xu, engineers at Kronos Research. The engineers developed an automated trading system named “Zeus,” which the company used for cryptocurrency trading. However, the resentment fueled by unpaid bonuses led these engineers to maliciously alter the simulation and predictive analysis code before their departure.

Mr. Xu’s alteration of a crucial segment of the code resulted in the program mistaking the “worst combination” for the “best combination.” This misjudgment led to disastrous investment decisions. Further, a subsequent tampering with electromagnetic records by the engineers skewed the program’s market trend analysis and triggered erroneous trades. The duo’s actions resulted in detrimental consequences for the company’s financial standing.

Legal Consequences 

While the defense argued that the changes led to merely a “suboptimal” investment mix and the system’s safety remained intact, the court dismissed these claims. Considering the substantial harm caused by the misuse of technical skills and the engineers’ failure to reach a settlement regarding their bonuses, the court handed down sentences to the engineers.

Mr. Chen received an 8-month sentence, which he can exchange for a fine, while Mr. Xu faced a 10-month sentence, also convertible to a penalty. This case serves as a reminder of the potential risks associated with disgruntled employees within the cryptocurrency and blockchain space, underscoring the importance of maintaining the integrity of the technology and the workforce.