Blockchain & Cryptocurrency
,
Cryptocurrency Fraud
,
Fraud Management & Cybercrime
Also: Fraud Convictions for Profit Connect and Block Bits Capital
Every week, ISMG rounds up cybersecurity incidents in digital assets. This week, hackers stole $8.5M from Term Finance, BounceBit to shutter blockchain after hack, Profit Connect and Block Bits Capital founders convicted in fraud cases, Roman Storm’s retrial delayed and AI use in crypto-linked crime jumped 40%.
See Also: Revolutionizing Cross-Border Transactions with Permissioned DeFi
Term Finance Vaults Lose $8.5 Million in Exploit
Term Finance lost about $8.5 million after an attacker exploited the governance system controlling its Ethereum-based lending vaults, said security firms PeckShield and CertiK.
The attacker withdrew ether and USDC, a stablecoin designed to track the U.S. dollar. PeckShield traced the stolen assets to an address that had earlier received funds through cryptocurrency mixer Tornado Cash.
Term said it was a governance exploit but has not disclosed how the attacker gained control. Its system normally delays governance changes for seven days and allows liquidity providers to block suspicious proposals.
The theft represented more than two-thirds of the assets held in Term’s vault product before the attack.
BounceBit Shuts Blockchain After $3 Million Exploit
BounceBit will close its independent blockchain and move to BNB Chain after an attacker stole about $3 million in BB tokens. The attacker exploited a software flaw that allowed transfers from accounts without proving the owners had approved them.
About 286.5 million BB tokens were moved from nine wallets before BounceBit stopped block production, the platform said. No private keys, signatures, wallets or exchange accounts were compromised and its other products were unaffected.
BounceBit plans to issue BB as a BEP-20 token, the standard format for tokens on BNB Chain. It will use account records taken before the attack to reverse unauthorized transfers and work with exchanges to correct customer balances.
The company said repairing its existing network would be difficult because Evmos, the software foundation behind it, was discontinued in May. Most BounceBit products and users are already available on BNB Chain.
Profit Connect Owner Convicted in $24 Million Fraud
A federal jury convicted Las Vegas businessman Brent C. Kovar of defrauding at least 400 investors of $24 million through his company, Profit Connect.
Kovar was found guilty of wire fraud, mail fraud and money laundering. Profit Connect operated from late 2017 until July 2021.
Kovar falsely claimed the company used artificial intelligence and powerful computers to mine digital assets and verify transactions. He promised investors fixed annual returns and a full money-back guarantee.
Kovar also claimed Profit Connect held large digital asset reserves and that investments had federal deposit insurance. Prosecutors said the company was not profitable, held no such reserves and could not deliver its promised returns or refunds.
Kovar faces a maximum possible prison sentence of 280 years. A federal judge will determine his punishment at sentencing on Nov. 30.
Jury Convicts Block Bits Capital Founder of Fraud
A U.S. federal jury convicted San Francisco resident Japheth Dillman of wire fraud and conspiracy to commit wire fraud over a fraudulent digital asset trading fund, said the Department of Justice.
Dillman helped establish Block Bits Capital and defrauded more than 20 investors of nearly $1 million by making false claims about the fund’s technology and profits. The prosecutors said Dillman and a co-conspirator told investors the fund used an automated trading tool called Autotrader, even though Dillman knew the system did not work.
The pair instead used investor money to pay themselves and make risky investments in other digital asset ventures, according to prosecutors. They concealed the risks and falsely claimed the fund was generating large profits.
Dillman faces up to 20 years in prison and a $250,000 fine for each conviction. He is free on bond and is scheduled to be sentenced on Dec. 8.
Roman Storm Retrial Delayed Until April 2027
Tornado Cash developer Roman Storm’s retrial has been pushed until April 26, 2027, while a federal judge considers his request for acquittal.
Storm, who co-founded the Tornado Cash digital asset mixing service, was accused of helping process more than $1 billion in illegal funds. A jury convicted him in August 2025 of operating an unlicensed money-transmitting business but could not reach verdicts on money laundering and sanctions-related charges.
Prosecutors want to retry Storm on those two unresolved charges, which could carry a combined maximum prison sentence of 40 years. Storm filed a motion seeking dismissal of the charges in September 2025, but the court has not yet ruled on it.
AI Use In Crypto-Linked Crime Jumps 40%
Artificial intelligence use in digital asset crime has risen 40% over the past year, driven mainly by scammers, said TRM Labs. The blockchain research firm rates AI adoption across such crime as “emerging,” while scams have already reached a “mature” stage.
Reports of scams involving AI tools, including realistic fake videos and automated chat programs, have surged since 2022. Losses linked to fake-video scams so far in 2026 have also exceeded the total reported in 2025.
Hackers are increasingly using AI to find security weaknesses and deceive targets. TRM said North Korea-linked groups have adopted AI for fake worker identities, manipulation and vulnerability searches. Digital asset hacks reached a record level in the first half of 2026, with North Korea-linked activity accounting for about $600 million in losses.
Click Here For The Original Source.
