MetaMask begins exiting 17,000 validators after reported reward diversion

MetaMask said it had proactively initiated the exit of 17,000 affected Ethereum validators holding more than 523,000 staked ETH, worth $1.4 billion, following a security incident. MetaMask said its wallets face no immediate threat and confined the issue to its non-custodial staking operations. MetaMask has provided no further details. Spearbit and Cantina security researcher 0xKaden said block rewards from 18 MetaMask validators went to an account funded through Tornado Cash instead of the intended fee recipient. The account holds 0.46 ETH, including 0.1 ETH received from Tornado Cash. The account received 18 block-reward transfers from Titan Relay: Forwarder, worth less than $1,000 in total. On-chain analyst Emmett Gallic identified a 133,300 ETH transfer, worth $360 million, from wallets labeled "Lubin/ConSensys" a few hours before MetaMask's statement. The article does not suggest that the transfer was suspicious. The incident resembles a $41 million loss from Kiln's SOL staking operations last September. Kiln subsequently exited all active ETH validators and rotated their signing keys, treating related operations as potentially compromised. In July, Drop Site News reported that ConsenSys, MetaMask's developer, had hired a consultant linked to North Korea for around a month. That report did not suggest the consultant's role was related to the affected staking operations. The Ethereum staking exit queue reached its highest level so far this year after MetaMask's response. The queue rose from around 200,000 ETH on Wednesday to more than 700,000 ETH on Thursday. The withdrawal wait time increased from three and a half days to almost two weeks. Liquid staking provider Lido expects MetaMask's ETH to be deposited again after the validators exit and withdrawals are completed. Lido estimates that the exit, withdrawal and re-entry cycle could take up to approximately 45 days because of the extended entry queue.