What the $1.4 Billion Bybit Hack Revealed About Blockchain Forensics

In February 2025, hackers drained approximately $1.4 billion from Bybit, one of the world’s largest crypto exchanges. Within 48 hours, blockchain investigators had linked the attack to North Korea’s Lazarus Group. Within days, significant portions of the stolen funds had been traced across multiple chains and flagged by exchanges worldwide.

A decade ago, this would have been impossible. The Bybit hack didn’t just reveal vulnerabilities in exchange security—it demonstrated how far blockchain forensics has advanced.

The attack

The breach exploited a vulnerability in Bybit’s multi-signature cold wallet infrastructure. Attackers gained access to enough signing keys to authorize a massive withdrawal, moving the funds through a rapid series of transactions designed to obscure the trail.

The playbook was familiar: fragment the stolen assets, bridge them across chains, cycle them through decentralized exchanges and mixers, and eventually convert to cash through less-regulated venues. It’s the same approach Lazarus has used in previous heists, including the $600 million Ronin Bridge attack and the $100 million Harmony Bridge theft.

What was different this time was the response.

The investigation

Within hours of the hack becoming public, independent blockchain investigators began mapping the fund flows. ZachXBT, a pseudonymous on-chain sleuth known for exposing crypto crimes, used Arkham’s blockchain intelligence platform to trace the initial transactions and identify wallet patterns consistent with previous Lazarus operations.

The attribution wasn’t guesswork. Lazarus Group has a documented fingerprint: specific wallet clustering behaviors, timing patterns, and mixing service preferences. By comparing the Bybit outflows against these known signatures, investigators could establish linkage with high confidence before any official statements.

Arkham’s bounty program accelerated the process. The platform operates an intelligence marketplace where anyone can post bounties for information about specific wallets or transactions. Within 24 hours of the Bybit hack, bounties had been posted and claimed for identifying key intermediary addresses, crowdsourcing the investigation across a global network of analysts.

Why speed matters

In crypto forensics, time is the critical variable. The faster stolen funds can be traced and flagged, the more likely they can be frozen or recovered.

When investigators identify a wallet receiving stolen assets, they can alert exchanges to block deposits from that address. If the funds move to a centralized exchange before being flagged, law enforcement can coordinate with the exchange to freeze the account. Every hour of delay gives attackers more opportunity to convert to cash or obscure the trail further.

The Bybit investigation demonstrated this dynamic. Because attribution happened within 48 hours, exchanges globally were able to update their blacklists before significant portions of the funds reached fiat off-ramps. While recovery remains uncertain—Lazarus has historically been willing to let stolen funds sit for years—the rapid response at least constrained the attackers’ options.

The infrastructure behind rapid attribution

This speed doesn’t happen by accident. It requires pre-existing infrastructure: labeled wallet databases, historical transaction graphs, pattern recognition systems, and distribution networks to share findings quickly.

Arkham research had already documented Lazarus Group’s prior operations, creating a reference dataset for comparison. When the Bybit hack occurred, investigators weren’t starting from zero—they were matching new transactions against known patterns.

The platform’s entity labeling proved particularly valuable. Rather than analyzing anonymous addresses, investigators could see which wallets belonged to known entities—exchanges, bridges, mixing services—and trace the flow through recognizable infrastructure.

This is the maturation of blockchain forensics from ad-hoc investigation to systematic surveillance. The tools exist to monitor, trace, and attribute in near real time. Exchanges and regulators now use these platforms in tandem—exchanges to update blacklists and freeze accounts, regulators to build cases and coordinate cross-border enforcement. The question is no longer whether stolen funds can be traced, but how quickly.

The deterrence question

Lazarus Group has stolen billions in cryptocurrency over the past decade. The Bybit hack, despite rapid attribution, likely succeeded in extracting significant value for North Korea’s weapons programs. Does better forensics actually deter future attacks?

The honest answer is: partially. Attribution increases the risk and cost of laundering stolen funds. Exchanges are faster to freeze flagged wallets. Jurisdictions with strong AML enforcement can pressure venues that facilitate conversion. The friction reduces the return on attack.

But sophisticated state actors operate on different incentives than criminal organizations. North Korea has demonstrated willingness to accept long delays and significant losses in the laundering process. Better forensics constrains but doesn’t eliminate the threat.

What forensics does accomplish is transparency. The crypto industry can now document, in public and in near real time, when attacks occur and who’s responsible. This matters for regulatory credibility, for investor confidence, and for the broader argument that blockchain’s transparency is a feature rather than a bug.

The integrated response

The Bybit incident also illustrated how intelligence and execution are converging. Traders monitoring the hack in real time could see which addresses were receiving funds, which exchanges were at risk of exposure, and how the market was likely to respond. For those looking to hedge or reposition around hack-driven volatility, having on-chain intelligence and execution in the same environment meant faster response times.

Platforms like Arkham Exchange, a transparency-first crypto trading platform for spot and perpetual futures, sit at this intersection, combining on-chain intelligence with trading infrastructure. Traders could monitor fund flows via Arkham Intel, assess contagion risk, and execute hedges in spot or perpetual futures without switching applications.

The next major hack will likely see even faster response: tighter integration between forensics platforms, exchange security teams, and law enforcement. The infrastructure is in place. The question is execution.