A major cryptocurrency theft has resulted in government-mandated accountability for Illusory Systems, operating as Nomad, following significant losses suffered due to vulnerabilities in their Token Bridge. The Federal Trade Commission (FTC) settlement requires Nomad to return funds that were recaptured from the 2022 hack and to introduce security safeguards. This move underscores the growing regulatory scrutiny facing cross-chain solutions as individual investors and institutions both pursue asset transfers across multiple blockchains. Some industry observers believe this case will influence how similar companies address the tension between rapid software deployment and risk management.
Reports from last year described the Nomad incident as one of the largest bridge hacks to date, with over $190 million lost or at risk. Earlier coverage highlighted concerns about whether Nomad had implemented sufficient controls, but regulatory action was not immediate. Updates since then confirm that much of the stolen cryptocurrency remains unreturned, spotlighting the absence of strong safeguards in decentralized finance projects. Now, with the FTC’s direct involvement and policy response, oversight has become more tangible, prompting other blockchain companies to reassess their cybersecurity strategies.
What Prompted the FTC’s Actions?
The FTC announced its settlement with Nomad after concluding that the company failed to deliver on its public promises to protect consumers. The vulnerability in the Token Bridge service, used for transferring digital assets between blockchains, exposed user funds to hackers. The commission determined that Nomad advertised high security standards but did not implement basic measures to safeguard assets or respond quickly to incidents.
How Did Security Failures Lead to Massive Losses?
In June 2022, Nomad deployed new code to Token Bridge after a security audit, but this update had insufficient testing. By July, hackers exploited these weaknesses to steal approximately $186 million worth of cryptocurrency. Internal investigations demonstrated a lack of robust code vetting, with engineers focusing on functionality over security, and without adequate automated monitoring or response plans in place. The flaw’s discovery stemmed from social media and the company’s response was slowed by insufficient resources.
What Are the Terms of the FTC Settlement?
Under the agreement, Nomad is compelled to establish a thorough cybersecurity program to address issues found during the investigation. This includes regular third-party assessments and improved protections for consumer funds. Furthermore, Nomad is required to return digital assets that law enforcement and white hat hackers managed to recover. FTC officials stressed the importance of follow-through on security claims, with one stating
“The FTC Act requires companies to take reasonable security measures.”
and adding
“It’s important that companies live up to their security promises to consumers.”
The case brings to light discrepancies between public messaging and internal practices regarding customer protection.
The Nomad incident serves as a reminder that amid technological innovation, basic cyber hygiene remains essential for consumer trust. Developers in the digital asset space encounter mounting pressure to balance speed with caution, and regulatory agencies appear increasingly willing to intervene when companies fall short of established norms. The requirements laid out in this settlement provide a blueprint for security governance that other crypto service providers may soon need to follow. Common pitfalls like inadequate code review, lack of incident response, and insufficient user communication have emerged repeatedly in similar cases, making comprehensive planning a priority.
Going forward, consumers should be aware that advertised security features for crypto products may not always match reality. Due diligence, such as reviewing a company’s transparency around audits and vulnerability responses, can provide additional protection. This settlement reinforces the need for both developers and users of decentralized finance applications to prioritize security practices and maintain realistic expectations around risk and recourse in a rapidly developing industry.
