Loopring, an Ethereum-based scaling solution, took a security blow on Sunday after hackers exploited their "Guardian" wallet system, draining over $5 million from affected users.

The twist? Loopring's Guardian system was designed to be an extra layer of security. Users could appoint trusted guardians (think friends or family) to help with account recovery, eliminating the risk of losing a seed phrase (a master password for crypto wallets).

But on Sunday, something went terribly wrong. Hackers bypassed Loopring's two-factor authentication (2FA) and impersonated wallet owners. They then initiated a "recovery process" through a single guardian account, allowing them to siphon off user funds.

Here's the kicker: it seems the hackers specifically targeted wallets with only one guardian assigned. This includes Loopring's own official guardian account, intended as a safety net for users who didn't set up their own guardians.

The stolen funds were quickly converted to Ethereum (ETH), and Loopring has since halted all Guardian and 2FA operations to prevent further breaches. While they scramble to understand how their 2FA system was compromised, Loopring faces a barrage of criticism.

Many users point out that Loopring advertises itself as "Ethereum's most secure wallet." Others argue the attack wouldn't have happened if users had simply added more guardians, as the app repeatedly prompts them to do.

Loopring is now offering compensation to affected users and working with security experts and law enforcement to track down the culprits. They've also opened up a channel for anyone with information about the hacker's wallet address.

This incident serves as a stark reminder: even with innovative security features, vigilance is key. With Loopring's reputation tarnished, the company will need to work hard to regain user trust and prove their commitment to robust security measures.