Paying Hackers to Give Money Back: Crypto's New Negotiation Tactic

What if your bank offered thieves a 10% tip to return stolen money? That's essentially what blockchain project IoTeX just did. After hackers drained $4.4 million from its cross-chain bridge, the company made an unusual offer: return the funds within 48 hours, keep $440,000 as a "white-hat bounty," and face no legal consequences.

It sounds absurd, but in crypto, it's becoming the new normal.

When Crime Pays (Literally)

The February 21st exploit hit IoTeX's ioTube bridge when hackers compromised a validator's private key on the Ethereum side. Within hours, IoTeX CEO Raullen Chai was sending on-chain messages to the attackers, essentially opening negotiations with cybercriminals.

"All fund movements across Ethereum, IoTeX, and bitcoin have been fully traced," Chai wrote in his digital ransom note. "Exchange deposits have been flagged and frozen."

But the hackers weren't sitting idle. Security firm PeckShield tracked the stolen assets as they were swapped into ether and routed through THORChain to bitcoin—a path that makes recovery "extremely difficult," according to ORQO Group CEO Nick Motz.

The reality? IoTeX identified 66.6 BTC (roughly $4.3 million) across four bitcoin addresses, but assets already laundered through decentralized exchanges are likely gone forever.

The Bridge Problem Nobody Wants to Fix

Cross-chain bridges have become crypto's Achilles' heel. More than $3.2 billion has been lost to bridge hacks, making them prime targets for sophisticated threat actors. But here's the uncomfortable truth: this wasn't even a smart contract vulnerability.

"The breach came down to a compromised validator owner private key on the Ethereum side, which is fundamentally an operational security failure," Motz explained. In other words, someone didn't properly secure their digital keys.

Human.tech co-founder Nanak Nihal Khalsa put it bluntly: "Whoever holds the private key is responsible for securing it. Is that reasonable? It's hard to say. But that's how the industry works right now."

The IOTX token tumbled 22% following the exploit, dropping from $0.0054 to below $0.0042 before partially recovering. For investors, it's another reminder that bridge risks often outweigh bridge benefits.

The Precedent Problem

IoTeX isn't alone in offering hacker bounties. Multiple crypto projects have tried the 10% bounty approach, with mixed results. Some hackers do return funds—either out of fear of prosecution or simple pragmatism. Others take the money and run.

But what message does this send? Are we normalizing negotiations with cybercriminals? Creating a business model where hacking becomes a low-risk, high-reward venture with built-in exit strategies?

The industry's liability norms remain "unsettled compared to traditional finance," as Khalsa notes. In traditional banking, institutions bear responsibility for security failures. In crypto, users often bear the cost while projects experiment with damage control.