More than 7,000 bitcoin (worth roughly $41m) has just been stolen from Binance, the world’s largest crypto exchange.
According to the formal statement Binance made to the media they discovered a “large scale security breach” on the 7th May. The exchange’s CEO, Changpeng Zhao, said hackers had accessed Binance users’ API keys and two-factor authentication codes and, Zhao fears, “potentially other info”.
As soon as the withdrawal was spotted the exchange immediately froze all withdrawals. While both deposits and withdrawals will continue to be suspended until next week to give Binance time to conduct “a thorough security review”, trading will be back online much sooner despite internal concerns that the hackers could still have control over some user accounts.
The statement goes on to say the hackers were only able to access Binance’s hot wallet which only contains 2% of their total bitcoin holdings. But, despite Mr Zhao’s claims that “all of our other wallets are secure and unharmed”, there is further concern that this may be an optimistic point of view. It’s not yet clear if Binance have actually identified how many accounts have been impacted.
Initially Binance tried to cover up the breach by tweeting the exchange would be taken offline for some “some unscheduled server maintenance” before adding “funds are #safu”.
#SAFU refers to Binance’s Secured Asset Fund for Users, essentially an emergency insurance fund to protect users against a large scale hack. The fund contains 10% of the trading fees earned by the exchange and is, thankfully, stored in a cold wallet.
A quick look at the responses to Mr Zhao’s tweet show the market is not as confident and some of the responses suggest some areas of the market the fund is either not big enough to cover the loss or is not able to provide the level of protection it is supposed to.
While it’s difficult to say if it’s a direct result of the hack, it’s probably more than a coincidence that the cryptocurrency markets have stumbled. The price of a bitcoin has dropped by $290, Litecoin and ether have dropped by around 5% while Binance’s own cryptocurrency, the Binance Coin (BNB), has dropped by just over 8%.
As one of the very few firms of solicitors in the UK that specialises in cryptocurrency cases this story worries us for two reasons.
Firstly if you’ve found you’ve lost money in any type of digital hack or cyber theft, what do you do? Given the invisibility of a hacker, identifying who has stolen your money let alone how to get it back can prove to be a difficult task.
Secondly, even if the exchange you’re dealing with is promising you that you have the security of a SAFU type arrangement to protect you in the event of a hack, can you be absolutely sure they actually have that insurance in place?
In either case you need to talk to lawyers who know exactly what you should do in order to reclaim the money you may have lost so if you have lost any money as a result of a cryptocurrency transaction – whether it was a result of fraud or just the exchange or dealer’s carelessness – call us today on 020 7792 5649 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it..
We will help.
