DEX in the City: How Claude's Red-Teaming Agents Escaped a Test Without Realizing It

**Katherine Kirkpatrick Bos** (0:00)
We're just living in a world that is getting crazier by the second, but we're lobsters boiling in a pot because we don't realize that unless we step back and take a look at what kind of world we're living in now, we won't realize that it's gonna get out of our hands and out of our control.

**Katherine Kirkpatrick Bos** (0:16)
Hi all, and welcome to DEX in the City, where the wallets are cold and the takes are hot. Before we get going, remember, we're lawyers, but we're not your lawyers. Nothing you hear on DEX in the City is legal or financial advice, and doesn't create an attorney-client relationship. For the fine print, check unchainedcrypto.com.
We'll be back in a minute after a word from our generous sponsors.

**SPEAKER_3** (0:37)
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**Katherine Kirkpatrick Bos** (0:59)
And we're back. First, we have Jessi, Web3 Prosecutor Charmed, Web3 Protector at Ribbit Capital, and Vy from the SDC to Web3. And I'm your host, KK, Luent and Tradfie and Conversant in Deep Tech at Chainlink Labs.

**Katherine Kirkpatrick Bos** (1:14)
Yeah.

**SPEAKER_3** (1:15)
Congratulations.

**Katherine Kirkpatrick Bos** (1:19)
We're starting with the good news this morning.

**Katherine Kirkpatrick Bos** (1:22)
Is that our crypto good news? No.
Look, I will tell you first, all the love to Starkware. I have the utmost respect for the absolute gigabrains building at Starkware. But I was really excited about Chainlink's mission and Chainlink, and being frankly, chain agnostic.
If any of our listeners don't actually know what Chainlink is, go check it out. If you don't know what Chainlink is, you're probably living under a rock.

**Katherine Kirkpatrick Bos** (1:51)
I've already been.

**Katherine Kirkpatrick Bos** (1:52)
Crypto, it has been-

**Katherine Kirkpatrick Bos** (1:54)
I love them all listeners though.

**Katherine Kirkpatrick Bos** (1:56)
Two of them are listeners. It dominates DeFi, but more than that Chainlink is playing a really important part in bringing the global financial system on Chain. So that's something that I feel very passionate about. I mean, guys, Fluent and TradFi, hello. The team is incredible. It's been a crazy few weeks because on a happy note, I've joined Chainlink Labs. On an unhappy note, I had an emergency appendectomy, but I'm still standing and I'm still here on DEX in the City. So all good things, so all good vibes going forward. So maybe that's our Crypto Good News. Thank you to doctors. Thank you to your half-nurses.
But we want to get right into the meat of things. I will now have a slew of new opinions on things like interoperability and all of the incredible stuff that Chainlink Labs is building. But for now, we have a jam-packed agenda. We're going to start out today on a bit of a somber note. This sort of thing we've talked about before, we have talked about hacks, we have talked about security incidents. But what I don't think we have ever talked about are hardware wallets getting hacked.
There was some news last week that Vy is going to elaborate on, but Vy, tell us more about what happened and where this leaves us as an industry.

**Vy Le** (3:24)
Yeah. Gosh, this is one of the saddest stories we've seen in crypto in a while, and I think our hearts go out to all of those affected.
I think for me, what's so heartbreaking is, a lot of people lost money thinking that they were doing everything right. In crypto, we regard self-custody as almost a sacred right, and so these people took custody of their own assets. They bought a reputable hardware wallet. They kept it offline. They thought they had eliminated one of the biggest risks in crypto, and yet they still lost their Bitcoin. I don't even know what the total number is right now. I think it's over 100 million and could keep going.

**Katherine Kirkpatrick Bos** (4:09)
It sounds like it's still happening.

**Vy Le** (4:11)
Yeah, like it's still ongoing, and there's still details coming out, but from what we know so far, like this wasn't a failure of Bitcoin itself, right? It's not like someone broke the underlying cryptography or that the wallet somehow became connected to the Internet and drained that way. It looks like the problem happened much, much earlier in the process when the wallet generated the seed phrase, right? Every cold wallet that you buy starts by generating a random seed phrase, which is a series of random words. That randomness is super important. The reason Bitcoin private keys are secure is because they're basically an infinitely large number of possible keys that no one could ever realistically guess yours.