Shakeeb Ahmed, a former senior security engineer at an international technology company, has made history as the first person convicted of hacking a smart contract. Ahmed admitted to cyber fraud for his attacks on two decentralized cryptocurrency exchanges, including Nirvana Finance. 

Ahmed’s guilty plea, entered before U.S. Magistrate Judge Ona T. Wang, involves forfeiting over $12.3 million, including approximately $5.6 million in fraudulently obtained cryptocurrency.

Damian Williams, the United States Attorney for the Southern District of New York, announced this significant milestone in prosecuting cyber crimes with DeFi. Ahmed’s case is noteworthy for being the first conviction of its kind involving a smart contract hack.

Ahmed’s Sophisticated Hacks Details

In July 2022, Ahmed executed sophisticated hacks on two decentralized cryptocurrency exchanges. He first targeted an unnamed exchange, exploiting a vulnerability in its smart contract and generating approximately $9 million in inflated fees. 

He negotiated with the exchange to return most funds, except $1.5 million, contingent on no law enforcement report.

The second attack was on Nirvana Finance. Ahmed took a flash loan of about $10 million and exploited the smart contract for a $3.6 million profit. He drained Nirvana’s funds and leading to its shutdown.

Ahmed’s Laundering Techniques and Online Searches

Post-hack, Ahmed used various methods to launder the stolen millions. He used token-swap transactions, blockchain bridging fraud, converting assets into Monero, and using overseas exchanges and mixers. 

His internet searches post-attacks indicated awareness of potential criminal liability. Including terms related to DeFi hacks, wire fraud, evidence laundering, and avoiding extradition.

Ahmed’s Sentencing and Investigative Acknowledgment

Ahmed, 34, from New York, faces up to five years in prison and must pay over $5 million in restitution. Sentencing is on March 13, 2024, by United States District Judge Victor Marrero. U.S. 

Attorney Damian Williams praised Homeland Security Investigations and the Internal Revenue Service – Criminal Investigation, extending gratitude to the U.S. Attorney’s Office for the Southern District of California.

The case, prosecuted by the Money Laundering & Transnational Criminal Enterprises Unit and Complex Frauds & Cybercrime Unit, sets a precedent for future DeFi cybercrime cases. Assistant U.S. Attorneys David R. Felton and Kevin Mead lead the prosecution, marking a significant step in the fight against cybercrimes in the evolving digital landscape.

Conclusion

Shakeeb Ahmed’s guilty plea in the groundbreaking case of hacking decentralized cryptocurrency exchanges marks a pivotal moment in cybersecurity and DeFi. His conviction for a smart contract hack, coupled with forfeiting over $12.3 million, serves as a stern warning against such cybercrimes, highlighting the legal system’s increasing ability to address and penalize sophisticated digital financial crimes.