dYdX Exchange Releases Postmortem on $31K Squarespace Account Hack Lost

dYdX, a prominent crypto exchange, announced on July 23 that its version 3.0 website had been compromised.

Users have been advised to avoid visiting the version 3.0 site or clicking any links until further notice. However, the team assured users that version 4.0 remains unaffected and is functioning normally.

dYdX has released a detailed postmortem on the Squarespace account hack, outlining the events and their responses. The exchange has decided to change domain registrars and continues to work with SEAL and other partners to prevent future incidents.

dYdX Exchange Website Compromised Due to Social Engineering Attack

According to the postmortem, the breach occurred after unauthorized individuals accessed dYdX trading’s Squarespace account through a social engineering attack on Squarespace customer support.

During the two-hour hijacking of the exchange domain, two users lost funds totaling approximately $31,000. dYdX Trading is in contact with the affected users to ensure they are compensated.

In 2023, Squarespace acquired all domains from the now-defunct Google Domains, migrating them over several months. The dydx.exchange domain, owned by dYdX Trading, was moved to Squarespace on June 15, 2024.

On July 9, attackers gained access to the dydx.exchange domain and modified the DNS nameservers from Cloudflare to DDoS-Guard.

This initial attack was mitigated by DNSSEC settings, which prevented users from accessing the compromised site. DYdX quickly resolved the issue through password and two-factor authentication (2FA) rotations.

Following reports of similar attacks on crypto-specific domains , SEAL, a crypto-focused security team, initiated an investigation . It was discovered that an OAuth vulnerability on Squarespace had been exploited, which Squarespace addressed and fixed on July 12 .

Despite this, the dydx.exchange domain was compromised again on July 23. Attackers managed to change the DNS Nameservers and remove DNSSEC settings, hosting a malicious site that tricked users into transferring Ethereum and ERC20 tokens.

During this period, dYdX collaborated with SEAL and other partners to block malicious sites on popular crypto wallets like Metamask and Phantom. Despite these efforts, two users lost $31,000 during the attack.

dYdX Exchange Recovers Website Following Squarespace Account Hack

The postmortem further revealed that the attacker had set the domain admin email to an address ending in outlook.com, with a username similar to the legal name of the billing administrator on dYdX’s account. This suggested a social engineering attack, as the attacker used a believable email address.

According to dYdX, its communications with Squarespace revealed that a human error initiated the takeover during the account-recovery process.

The attacker bypassed 2FA and modified the account email without providing valid security credentials. Squarespace’s customer service did not attempt to contact any other listed admins on the domain before making these changes.

In response to the attack, dYdX transferred its domain registration to Cloudflare to enhance security. The transfer was expedited and completed within six hours.

dYdX confirmed that there were no security issues with its smart contracts, backend systems, or the dYdX Chain as a result of the incidents.

The dYdX team stated social media X , advising users to clear their browser cache and restart their browser before reconnecting to the website to ensure they were not accessing the compromised site.