Technical Traceability Analysis Report on the LuBian Mining Pool Hacked and Stolen a Large Amount of Bitcoin

Author: National Computer Virus Emergency Response Center

 

On December 29, 2020, the LuBian mining pool suffered a major hacking incident, with a total of 127,272.06953176 bitcoins (worth about $3.5 billion at the time, now valued at $15 billion) stolen by the attacker. The holder of these massive bitcoins was Chen Zhi, Chairman of the Prince Group in Cambodia.

After the hacking incident, Chen Zhi and his Prince Group posted messages on the blockchain multiple times in early 2021 and July 2022, appealing to the hacker, hoping the hacker would return the stolen bitcoins and expressing willingness to pay a ransom, but received no response.

Strangely, after the theft, these massive bitcoins remained dormant in the attacker's controlled bitcoin wallet address for as long as four years, with almost no movement, which is clearly inconsistent with the usual behavior of hackers eager to cash out for profit. Instead, it appears more like a precise operation orchestrated by a "state-level hacker organization." It was not until June 2024 that these stolen bitcoins were transferred again to new bitcoin wallet addresses, and have remained untouched since.

On October 14, 2025, the U.S. Department of Justice announced criminal charges against Chen Zhi and stated that it had confiscated 127,000 bitcoins from Chen Zhi and his Prince Group. Various pieces of evidence indicate that the massive bitcoins confiscated by the U.S. government from Chen Zhi and his Prince Group were the same LuBian mining pool bitcoins stolen by hackers using technical means as early as 2020. In other words, the U.S. government may have already stolen the 127,000 bitcoins held by Chen Zhi through hacking techniques as early as 2020, making this a typical "black eats black" event orchestrated by a state-level hacker organization.

This report, from a technical perspective, conducts technical tracing and in-depth analysis of the key technical details of the incident, focusing on the ins and outs of the stolen bitcoins, reconstructing the complete attack timeline, and evaluating the security mechanisms of bitcoin, hoping to provide valuable security insights for the cryptocurrency industry and users.

I. Background of the Incident

The LuBian mining pool was established in early 2020 and quickly rose as a bitcoin mining pool, with China and Iran as its main operating bases. In December 2020, the LuBian mining pool suffered a large-scale hacking attack, resulting in the theft of more than 90% of its bitcoin holdings. The total amount stolen was 127,272.06953176 BTC, which closely matches the 127,271 BTC mentioned in the U.S. Department of Justice indictment.

The LuBian mining pool's operating model included centralized storage and distribution of mining rewards. The bitcoins in the mining pool addresses were not stored in regulated centralized exchanges but in non-custodial wallets. Technically, non-custodial wallets (also known as cold wallets or hardware wallets) are considered the ultimate safe haven for crypto assets. Unlike exchange accounts, which can be frozen by a court order, non-custodial wallets are more like a bank vault that belongs solely to the holder, with the key (private key) only in the holder's possession.

As a cryptocurrency, bitcoin uses on-chain addresses to identify the ownership and flow of bitcoin assets. Possession of the private key to an on-chain address allows complete control over the bitcoins in that address. According to reports from on-chain analysis institutions, the massive bitcoins controlled by the U.S. government and belonging to Chen Zhi highly overlap with the bitcoins stolen in the LuBian mining pool hacking incident.

On-chain data records show that on December 29, 2020 (GMT+8), the core bitcoin wallet address of LuBian experienced an abnormal transfer, with a total of 127,272.06953176 BTC moved, closely matching the 127,271 BTC mentioned in the U.S. Department of Justice indictment. After this abnormal transfer, the stolen bitcoins remained dormant until June 2024.

Between June 22 and July 23, 2024 (GMT+8), these stolen bitcoins were again transferred to new on-chain addresses and have remained untouched since. The well-known U.S. blockchain tracking platform ARKHAM has labeled these final addresses as being held by the U.S. government. Currently, the U.S. government has not disclosed in the indictment how it obtained the private keys to Chen Zhi's massive bitcoin on-chain addresses.

Figure 1: Key Activity Timeline

II. Attack Chain Analysis

As is well known, in the blockchain world, randomness is the cornerstone of cryptographic security. Bitcoin uses asymmetric encryption technology, and the bitcoin private key is a string of 256-bit binary random numbers, with a theoretical brute-force count of 2^256, which is nearly impossible. However, if this 256-bit binary private key is not completely randomly generated, for example, if 224 bits follow a predictable pattern and only 32 bits are random, the private key strength is greatly reduced, requiring only 2^32 (about 4.29 billion) attempts to brute-force. For example, in September 2022, the UK crypto market maker Wintermute lost $160 million due to a similar pseudo-random number vulnerability.

In August 2023, the overseas security research team MilkSad first disclosed the discovery of a pseudo-random number generator (PRNG) vulnerability in a third-party key generation tool and successfully applied for a CVE number (CVE-2023-39910). In the team's published research report, it was mentioned that the LuBian bitcoin mining pool had a similar vulnerability, and among the LuBian bitcoin mining pool addresses attacked by hackers, all 25 bitcoin addresses listed in the U.S. Department of Justice indictment were included.

Figure 2: List of 25 Bitcoin Wallet Addresses in the U.S. Department of Justice Indictment

As a non-custodial wallet system, the LuBian bitcoin mining pool's wallet addresses relied on a custom private key generation algorithm to manage funds. The private key generation did not use the recommended 256-bit binary random number standard but relied on a 32-bit binary random number. This algorithm had a fatal flaw: it only used a timestamp or weak input as the seed for the "pseudo-random generator" Mersenne Twister (MT19937-32), which is equivalent to the randomness of a 4-byte integer and can be efficiently brute-forced in modern computing. Mathematically, the probability of cracking is 1/2^32. For example, if an attack script tests 10^6 keys per second, the cracking time is about 4,200 seconds (just about 1.17 hours). In practice, optimized tools like Hashcat or custom scripts can further accelerate the process. The attacker exploited this vulnerability to steal a massive amount of bitcoin from the LuBian mining pool.

Figure 3: Comparison Table of LuBian Mining Pool and Industry Security Standards Deficiencies

Through technical tracing, the complete timeline and related details of the LuBian mining pool hacking incident are as follows:

1. Attack and Theft Phase: December 29, 2020 (GMT+8)

Event: The hacker exploited the pseudo-random number vulnerability in the LuBian mining pool's bitcoin wallet address private key generation, brute-forcing more than 5,000 weak random wallet addresses (wallet type: P2WPKH-nested-in-P2SH, prefix 3). In about two hours, about 127,272.06953176 BTC (worth about $3.5 billion at the time) was drained from these wallet addresses, leaving less than 200 BTC. All suspicious transactions shared the same transaction fee, indicating the attack was executed by an automated batch transfer script.

Sender: Group of weak random bitcoin wallet addresses of the LuBian mining pool (controlled by the LuBian mining operation entity, affiliated with Chen Zhi's Prince Group);

Receiver: Group of bitcoin wallet addresses controlled by the attacker (addresses not disclosed);

Transfer path: Group of weak wallet addresses → Group of attacker wallet addresses;

Correlation analysis: The total amount stolen was 127,272.06953176 BTC, closely matching the 127,271 BTC mentioned in the U.S. Department of Justice indictment.

2. Dormancy Phase: December 30, 2020 to June 22, 2024 (GMT+8)

Event: After being stolen through the pseudo-random number vulnerability in 2020, these bitcoins were stored in the attacker's controlled bitcoin wallet addresses for as long as four years, remaining dormant, with only less than one ten-thousandth of dust transactions possibly used for testing.

Correlation analysis: Until the U.S. government fully took over on June 22, 2024, these bitcoins were almost untouched, which is clearly inconsistent with the usual behavior of hackers eager to cash out for profit, and appears more like a precise operation orchestrated by a state-level hacker organization.

3. Recovery Attempt Phase: Early 2021, July 4 and 26, 2022 (GMT+8)

Event: After the bitcoins were stolen, during the dormancy period, in early 2021, the LuBian mining pool sent more than 1,500 messages (costing about 1.4 BTC in fees) via Bitcoin's OP_RETURN function, embedding them in the blockchain data area, pleading with the hacker to return the funds. Example message: "Please return our funds, we'll pay a reward." On July 4 and 26, 2022, the LuBian mining pool again sent messages via the Bitcoin OP_RETURN function.

Sender: Weak random bitcoin wallet addresses of LuBian (controlled by the LuBian mining operation entity, affiliated with Chen Zhi's Prince Group);

Receiver: Group of bitcoin wallet addresses controlled by the attacker;

Transfer path: Group of weak wallet addresses → Group of attacker wallet addresses; small transactions embedded with OP_RETURN;

Correlation analysis: After the theft, these messages were confirmed to be multiple attempts by the LuBian mining pool as the sender to contact the "third-party hacker," requesting the return of assets and discussing ransom matters.

4. Activation and Transfer Phase: June 22 to July 23, 2024 (GMT+8)

Event: Bitcoins in the group of attacker-controlled bitcoin wallet addresses were activated from dormancy and transferred to final bitcoin wallet addresses. The final wallet addresses were labeled by the well-known blockchain tracking platform ARKHAM as being held by the U.S. government.

Sender: Group of bitcoin wallet addresses controlled by the attacker;

Receiver: New consolidated final wallet address group (not disclosed, but confirmed to be a group of wallet addresses controlled by the U.S. government)

Transfer path: Group of bitcoin wallet addresses controlled by the attacker → Group of wallet addresses controlled by the U.S. government;

Correlation analysis: After being dormant for four years with almost no movement, these massive stolen bitcoins were ultimately controlled by the U.S. government.

5. Announcement and Seizure Phase: October 14, 2025 (U.S. local time)

Event: The U.S. Department of Justice issued an announcement, stating that it had filed charges against Chen Zhi and "confiscated" the 127,000 bitcoins he held.

At the same time, through the blockchain's public mechanism, all bitcoin transaction records are publicly traceable. Based on this, this report traces the source of the massive stolen bitcoins from the weak random bitcoin wallet addresses of LuBian (controlled by the LuBian mining operation entity, possibly affiliated with Chen Zhi's Prince Group). The total number of stolen bitcoins is 127,272.06953176, sourced from: about 17,800 from independent "mining," about 2,300 from mining pool wage income, and about 107,100 from exchanges and other channels. Preliminary results show discrepancies with the U.S. Department of Justice indictment, which claims all sources are illegal income.

III. Technical Details of the Vulnerability

1. Bitcoin Wallet Address Private Key Generation:

The core of the LuBian mining pool vulnerability lies in its private key generator using a flaw similar to the "MilkSad" defect in Libbitcoin Explorer. Specifically, the system used the Mersenne Twister (MT19937-32) pseudo-random number generator, initialized with only a 32-bit seed, resulting in effective entropy of only 32 bits. This PRNG is not cryptographically secure, making it easy to predict and reverse engineer. Attackers can enumerate all possible 32-bit seeds (0 to 2^32-1), generate the corresponding private keys, and check if they match the known wallet address public key hashes.

In the bitcoin ecosystem, the private key generation process is usually: random seed → SHA-256 hash → ECDSA private key.

The implementation of the LuBian mining pool's base library may have been based on custom code or open-source libraries (such as Libbitcoin), but ignored the security of entropy. The similarity to the MilkSad vulnerability is that Libbitcoin Explorer's "bx seed" command also uses the MT19937-32 random number generator, relying only on a timestamp or weak input as the seed, making the private key vulnerable to brute-force attacks. In the LuBian attack incident, more than 5,000 wallets were affected, indicating the vulnerability was systemic, possibly due to code reuse during batch wallet generation.

2. Simulated Attack Process:

(1) Identify target wallet addresses (by monitoring LuBian mining pool activity on-chain);

(2) Enumerate 32-bit seeds: for seed in 0 to 4294967295;

(3) Generate private key: private_key = SHA256(seed);

(4) Derive public key and address: using ECDSA SECP256k1 curve calculation;

(5) Match: If the derived address matches the target, use the private key to sign the transaction and steal the funds;

Comparison with similar vulnerabilities: This vulnerability is similar to Trust Wallet's 32-bit entropy defect, which once led to large-scale bitcoin wallet address cracking; Libbitcoin Explorer's "MilkSad" vulnerability also exposed private keys due to low entropy. These cases all stem from legacy issues in early codebases that did not use the BIP-39 standard (12-24 word seed phrases, providing high entropy). The LuBian mining pool may have used a custom algorithm intended to simplify management but neglected security.

Lack of defense: The LuBian mining pool did not implement multisig, hardware wallets, or hierarchical deterministic wallets (HD wallets), all of which could enhance security. On-chain data shows the attack covered multiple wallets, indicating a systemic vulnerability rather than a single point of failure.

3. On-chain Evidence and Recovery Attempts:

OP_RETURN messages: The LuBian mining pool sent more than 1,500 messages via Bitcoin's OP_RETURN function, costing 1.4 BTC, pleading with the attacker to return the funds. These messages are embedded in the blockchain, proving they were actions of the real owner rather than forgeries. Example messages include "please return funds" or similar pleas, distributed across multiple transactions.

4. Attack Correlation Analysis:

On October 14, 2025 (U.S. local time), the U.S. Department of Justice's criminal indictment against Chen Zhi (case number 1:25-cr-00416) listed 25 bitcoin wallet addresses, which held about 127,271 BTC, with a total value of about $15 billion, and have been seized. Through blockchain analysis and official document review, these addresses are highly related to the LuBian mining pool hacking incident:

Direct correlation: Blockchain analysis shows that the 25 addresses in the U.S. Department of Justice indictment are the final holding addresses of the bitcoins stolen in the 2020 LuBian mining pool attack. The Elliptic report pointed out that these bitcoins were "stolen" from LuBian mining pool's mining operations in 2020. Arkham Intelligence confirmed that the funds seized by the U.S. Department of Justice directly originated from the LuBian mining pool theft incident.

Indictment evidence correlation: Although the U.S. Department of Justice indictment does not directly name the "LuBian hack," it mentions that the funds originated from "stolen attacks on bitcoin mining operations in Iran and China," which is consistent with the on-chain analysis of Elliptic and Arkham Intelligence.

Attack behavior correlation: Judging from the attack method, after the massive bitcoins of the LuBian mining pool were technically stolen in 2020, they remained dormant for four years, with only less than one ten-thousandth of dust transactions occurring, and were almost untouched until the U.S. government fully took over in 2024. This is inconsistent with the usual behavior of hackers eager to cash out for profit, and appears more like a precise operation orchestrated by a state-level hacker organization. Analysis suggests that the U.S. government may have already controlled these bitcoins in December 2020.

IV. Impact and Recommendations

The impact of the LuBian mining pool hacking incident in 2020 was far-reaching, leading to the actual dissolution of the mining pool, with losses amounting to more than 90% of its total assets at the time. The stolen bitcoins are now worth $15 billion, highlighting the risk amplification caused by price volatility.

The LuBian mining pool incident exposed systemic risks in random number generation within the cryptocurrency toolchain. To prevent similar vulnerabilities, the blockchain industry should use cryptographically secure pseudo-random number generators (CSPRNG); implement multi-layered defenses, including multisig, cold storage, and regular audits; and avoid custom private key generation algorithms. Mining pools should integrate real-time on-chain monitoring and abnormal transfer alert systems. Ordinary users should avoid using unverified key generation modules from the open-source community. This incident also reminds us that even with the high transparency of blockchain, weak security foundations can still lead to catastrophic consequences. It also highlights the importance of cybersecurity in the future development of the digital economy and digital currencies.