Kaito AI’s official X (formerly Twitter) account and the personal account of its founder, Yu Hu

The attackers falsely claimed Kaito [KAITO] wallets were compromised, triggering panic among investors.

A targeted cyberattack compromised Kaito AI’s official X (formerly Twitter) account and the personal account of its founder, Yu Hu.

The incident appears to be linked to a coordinated market manipulation scheme that aimed to capitalize on the volatility of KAITO, the native token of Kaito AI’s liquidity management protocol.

The attackers falsely claimed that Kaito [KAITO] wallets were compromised, intending to trigger panic among investors and influence the price of KAITO.

The fraudulent claims were widely covered by the crypto media, amplifying the impact among a broader audience.

The incident began with a now-deleted post from Kaito AI’s X account announcing the detection of irregular activity in multiple wallets linked to the protocol.

The post claimed that the team was actively investigating to assess the potential impact on the platform.

“Initial reports suggest that a percentage of the token supply may have been compromised, and we are working diligently to determine the full extent of this incident. We will provide regular updates to keep our community informed.”

The statement concluded by urging the community to remain calm and trust only official communication channels for accurate information concerning the reported incident.

The misleading posts caused an immediate drop in KAITO’s price, which fell sharply from $1.49 to $1.3, as investors reacted to the claims of compromised wallets and a potential rug pull.

However, the information was later corrected by Yu Hu, who stated that no KAITO wallets were at risk and that an investigation into the security breach was ongoing.

He explained that the X accounts were quickly recovered, but the price impact was already felt, with KAITO experiencing significant volatility in a short time frame.

This timing was no coincidence, as the attack occurred while Yu Hu was asleep in a different timezone.

Confirming this timing, Sandra Leow, a research partner at Kaito AI, stated that the hackers had waited for Yu Hu’s timezone to carry out the attack.

The timing was crucial as it allowed the attackers to intervene quickly to correct the misinformation and prevent further panic selling.

This coordinated effort is evident in the rapid sequence of events.

The hackers’ aim was to capitalize on the initial panic by shorting KAITO and profiting from its fall.

After gaining control of Kaito AI’s X account, they posted a message concerning a Kaito supply issue.

The post claimed that the team was investigating a potential shortfall in the total circulating supply of KAITO, leading some community members to fear a rug pull.

The message on Kaito AI’s X account read,

Good morning! We have identified an issue with the total circulating supply of KAITO and are actively investigating to determine the full extent of this incident.

The reported shortfall in the token supply has raised concerns among community members, who are closely following the developments and awaiting updates from the Kaito AI team. The incident appears to be linked to a broader pattern of cyberattacks targeting Web3 projects recently, with attackers compromising X accounts to spread false information and manipulate crypto prices.

This incident is part of a larger trend that has seen several projects targeted by attackers who compromise X accounts to spread false information and panic among investors.

The market reacted swiftly to the misinformation spread by the compromised Kaito AI X account, with KAITO’s price plummeting to $1.30 before rebounding.

The attack initially triggered panic selling, leading to a sharp decline of 9.07% from its previous level.

As the false tweets were removed and clarifications were provided by Yu Hu and the Kaito AI team, KAITO’s price began recovering.

Investors responded to the updates and regained confidence in the project.

The token then surged to $1.56, a 20% increase from its lowest point as seen on TradingView.

However, KAITO’s price did not remain at its peak for long.

Following the price correction and a surge to highs of $1.53, the token settled at $1.44, reflecting an overall 9.12% gain from the initial drop.

This pattern of extreme fluctuation suggests that the attackers may have capitalized on the volatility to execute profitable trades.

Market participants quickly took note of these price swings, with KriptoAlly.eth questioning whether such a sudden movement was purely a reaction to misinformation or a deliberate market manipulation attempt.

“$KAITO price dropped to $1.30. And then it hit $1.45, a fluctuation of nearly 12%. Was that all for this?”

According to Yu Hu’s investigation, which was assisted by DeFiSquared, the same group appears to be responsible for hacking both Kaito AI’s X account and the X account of Defiant founder Ben (aka "DB").

The timing of the events and transactions suggests a coordinated effort to maximize profits through leveraged trades and arbitrage opportunities.

The hackers had a large Trump token position on Hyperliquid [HYPE]