All retirement funds are gone! Investor XRP Wallet was hacked, and 3 million dollars flowed into Huione Money Laundering.

54-year-old retiree Brandon LaRoque discovered that 1.2 million XRP (worth approximately $3 million) in his Ellipal XRP Wallet was stolen, which represented his life savings accumulated since 2017. Blockchain investigator ZachXBT tracked the loss through over 120 cross-chain exchanges and found that the assets disappeared at an OTC Trading desk linked to Huione.

Pension Gone: Fatal Security Flaw in XRP Wallet

(Source: Youtube)

The incident began earlier this month when Brandon LaRoque discovered that 1.2 million XRP in his Ellipal XRP Wallet had been stolen. Notably, this stolen amount is valued at 2.88 million dollars at the current exchange rate, representing the life savings of this 54-year-old retiree accumulated since 2017.

He originally thought that his funds were safe in the cold wallet. However, later, LaRoque discovered that importing his seed phrase into the Ellipal mobile application actually converted the settings to a hot wallet. This fatal misunderstanding led to disastrous consequences.

“I have been accumulating XRP for the past eight years,” LaRock described the theft in a YouTube video. “This amounts to our entire retirement life, and I don't know what to do.” This kind of desperate voice is not uncommon in cases of stolen XRP Wallets.

The Ellipal case has once again sparked debates over the security of self-custody. Victims confused Ellipal's cold wallet with application-based hot wallets, reflecting issues of unclear XRP wallet design and a lack of user education. A cold wallet should be completely offline, with the private key never touching the network. However, when users enter their seed phrases into the mobile application, the private keys are exposed to the online environment, essentially turning into a hot wallet.

This kind of design ambiguity is a common issue with many XRP wallets. Users often mistakenly believe that as long as they use a hardware wallet or a so-called “cold wallet” from a reputable brand, their funds are absolutely safe. In reality, any mistake in the operational process can compromise security. Whether Ellipal has adequately warned users about this risk in the user interface and documentation is questionable.

Huione Money Laundering Network: $15 Billion Black Channel

ZachXBT's on-chain investigation found that the attackers exchanged the stolen XRP through 120 Ripple-to-Tron bridge transactions. They leveraged Bridgers (formerly known as SWFT) and then consolidated the funds onto Tron. Within three days, these assets vanished into an OTC Trading desk linked to Huione.

The U.S. Treasury recently imposed sanctions on this Southeast Asian payment network because the company was involved in laundering money through fraud, human trafficking, and cybercrime, with amounts in the billions of dollars. The case links the XRP Wallet theft to Huione's network, exposing a critical vulnerability in global law enforcement. U.S. authorities stated that Huione's money laundering facilitated over $15 billion in illegal transfers.

The operation mode of the Huione money laundering network is extremely covert. As a seemingly legitimate payment and foreign exchange service provider, Huione operates in several Southeast Asian countries, providing criminals with a channel to exchange cryptocurrency for fiat currency. Due to the relatively loose regulations in these countries and the difficulties in law enforcement coordination, Huione has been able to evade sanctions for a long time.

The downside is that even if the blockchain path is public, it is still difficult to interrupt money laundering channels across jurisdictions. ZachXBT was able to track the flow of funds to Huione, but could not stop the funds from being cashed out and disappearing there. This enforcement vacuum is the fundamental reason why cryptocurrency crime is rampant.

Huione's Three-Step Process for Money Laundering:

Step 1: cross-chain obfuscation: Convert XRP to Tron through 120 bridge transactions, obfuscating the source of funds.

Step 2: Consolidation Transfer: Integrate small amounts of funds into a larger amount and transfer to a new address on the Tron chain.

Step 3: OTC cash out: Exchange for fiat currency through the OTC trading desk linked to Huione, completely disappearing.

95% Recovery Companies Are Predators: The Secondary Fraud Industry Chain

Although law enforcement often struggles to respond quickly, ZachXBT stated that a revival economy has emerged, exploiting victims' feelings of despair. He wrote, “Another lesson is that over 95% of recovery companies are predatory; they only provide basic reports and charge high fees, yet offer very little actionable insight.”

He added that many such companies rely on search engine optimization and social media targeting to attract victims of XRP wallet theft. They often provide only superficial blockchain reports or tell clients to “contact the exchange.” The actual value of this service is extremely low, but the fees are very high, often requiring victims to pay tens of thousands of dollars in upfront costs or high commissions after successfully recovering their funds.

This second-layer mechanism has turned many high-value hacker attacks into multi-stage crimes. First, the hacker carries out the attack, followed by fake recovery operators who promise to recover funds that have actually long since vanished. For victims like LaRoque, who has already lost 3 million dollars, the false promises of these recovery companies are like adding insult to injury.

ZachXBT suggests that the real tragedy is that the next wave of losses may not come from hackers, but from those who claim to help recover the funds. When victims desperately seek help, these predatory companies exploit their hope and helplessness to squeeze out the last bits of value.

XRP Wallet Security Lessons: The Deadly Confusion of Hot and Cold Wallets

In addition to money laundering clues and the recovery of company scams, the Ellipal case has once again sparked a debate over the security of self-custodial XRP Wallets. Victims confused Ellipal's cold Wallet with app-based hot Wallets, reflecting issues of unclear Wallet design and a lack of user education.

The fundamental difference between cold wallets and hot wallets lies in whether the private keys come into contact with the network. A true cold wallet's private keys never come into contact with any online devices; all transaction signatures are completed in an offline environment. In contrast, hot wallet private keys are stored in online devices, making them convenient to use but less secure.

The error of LaRoque lies in inputting the seed phrase into the mobile application. Even though the Ellipal hardware device itself is a cold wallet, once the seed phrase is input into an online application, the security of the entire XRP wallet is downgraded to that of a hot wallet. This operational mistake may stem from a misunderstanding of how wallets work, or it could be that Ellipal's user interface does not adequately warn about the risks of such an operation.

Due to law enforcement's lack of capability to handle cryptocurrency-related crimes, the hope of recovering the 3 million dollars from LaRoque is slim. As transnational money laundering networks like Huione become increasingly rampant, the difficulty of recovery also rises. Even if ZachXBT is able to track the flow of funds, the transparency of the blockchain loses its effect once the funds enter the Huione network and are exchanged for fiat currency.