Electrum has released version 4.8.3 to fix a high-severity vulnerability that developers said was being actively exploited through malicious wallet servers. According to the project, the issue affected all earlier versions and could let an attacker replace a legitimate pending bitcoin payment with a fraudulent one, then rely on the user to unknowingly approve it.

The flaw involved Electrum’s handling of unconfirmed transactions. While the wallet validates confirmed transactions independently, older versions could accept certain unconfirmed transactions without checking their signatures, creating an opening for a compromised server to present a fake payment as if it were a normal pending transfer.

How the attack worked

Electrum uses external servers to provide transaction history, fee estimates and transaction broadcasting. In the vulnerable versions, a malicious server could intercept a legitimate outgoing payment, stop it from being broadcast and substitute a different transaction that sent the funds to an address controlled by the attacker.

That replacement transaction carried invalid signatures, but Electrum could still display it in the wallet as an ordinary unconfirmed payment. The weakness was documented in GitHub advisory GHSA-6jp4-8v48-cc5v.

Fee increases became the trigger

The attack became especially dangerous when a user tried to raise the fee on a pending transaction through Replace-By-Fee, or RBF. Instead of simply increasing the fee on the intended payment, the user could end up signing the substituted transaction, effectively authorizing the transfer of their own bitcoin to the attacker.

Developers said attackers also tried to hide the swap by generating destination addresses whose last four characters matched the legitimate recipient’s address. In at least one case, the fraudulent transaction showed a zero fee, which may have encouraged the victim to initiate the fee bump that completed the theft.

Reports moved the issue from suspicion to confirmed loss

Electrum developers said they received two private reports. On Oct. 11, a user identified as dannydeezy reported transaction substitution, although the role of the fee-bump process was not yet fully understood.

A second report arrived on Oct. 18 from Raju-K12, who reported losing funds after approving a fee increase. That case showed the attack was not only possible in theory but had already resulted in at least one theft.

What changed in version 4.8.3

The fix was introduced in commit 90fe308. With the update, Electrum now verifies signatures for unconfirmed transactions that spend coins belonging to the wallet. Transactions that fail those checks are rejected before they can enter the wallet’s local history.

Electrum urged anyone using a version older than 4.8.3 to upgrade immediately. The project said downloads should come only from electrum.org and that users should verify the software’s cryptographic signatures.

Immediate precautions and confirmed exposure

Until they upgrade, users were advised to closely check destination addresses and payment amounts before signing any transaction, including when adjusting fees. The incident showed that even when private keys remain under the user’s control, a wallet can still be manipulated into presenting a signature request for a payment the user never meant to make.

Electrum said this specific attack does not affect users who connect only to trusted, self-hosted Electrum servers. The immediate next step confirmed by the project is migration to version 4.8.3 or later, which blocks the transaction-substitution method used in the reported cases.

Source: news.bitcoin.com