First of all, our hearts go out to the Solana community. Attacks like this affect not just the directly targeted system, but everyone in the space indirectly by eroding people's confidence in the space. Here's hoping for a quick clarification and recovery, if possible.
Because the transactions are signed properly, it's likely that the attacker has acquired access to private keys. But how?
One possible route is a "supply chain attack" where a JS library is hacked, and it exfiltrates (steals) users' private keys. Affected wallets seem to have been created in the last ~9 months, but there are reports of freshly created wallets also being affected.
IOTA was compromised by such an attack and never quite recovered. If the same key is in two different hands, it's very difficult to figure out who the legitimate owner is. Stopping the chain wouldn't help, the attack would resume when the chain resumes.
A lot of people have suggested abouta faulty random number generator. This seems really anachronistic. 10 years ago, maybe. But we now know what not to do during private key generation. So I would be shocked if the hacker was "cracking" the keys because of lack of entropy.
Another suggestion was a browser exploit/zero-day. This also seems highly unlikely, partly because there are reports from multiple systems and browsers, and partly because it would affect all internet systems, not just Solana.
So where does that leave us? The best candidate explanation so far is from Ava Labs'
@_patrickogrady: A potential nonce reuse that ends up revealing the private key.
I wonder if there’s a nonce reuse bug in some ed25519 signature library solana projects are using. I think this would allow any attacker looking at solana to derive the private key regardless of where it was generated. Here’s an article that covers this: blog.trailofbits.com/2020/06/11/ecd…
This isn't the EVM-style nonce, by the way, but the "ps and qs" used in crafting ecdsa signatures.
In all cases, hardware wallets and CEXes seem unaffected, so those of you holding your Sol assets on those systems ought to be fine.
Wishing a quick recovery to everyone affected by this problem in the Solana ecosystem.