Binance is facing a growing crisis of confidence after a $6.3bn cryptocurrency theft that experts say was likely carried out by North Korean hackers. The exchange described the incident as the largest online theft on record.
More than $2.5bn was taken in a single transaction. According to Binance, attackers infiltrated an engineer’s laptop and used that access to drain wallets. The company later disclosed that there were additional points of breach in its systems.
Binance said it would cover the losses and that customer funds were safe. It also reported freezing about half of the funds targeted in the attack, preventing that portion of the cryptocurrency from being taken. Co-founder Yi He said the company’s priority was securing its systems before allowing users to withdraw and resuming operations.
The incident has prompted customers to move their money. Binance said it processed $4.6bn in withdrawals and $1bn in deposits by Sunday afternoon, a net outflow of around $3.6bn. That amounted to 2.1% of its $171bn in assets under management.
Many crypto users have no formal deposit protection in countries including the US, UK and Australia, so governments would not reimburse them if an exchange were hacked or went bankrupt. In Australia, users may be able to claim a capital loss on their tax return if they can prove a crypto asset was lost or stolen.
Former Binance CEO Changpeng Zhao warned that scammers were exploiting the incident with fake compensation offers. Binance said screenshots advertising $150 payments for users affected by withdrawal suspensions were digitally altered and the claims were false. The hack also unsettled traditional markets, with investors withdrawing money from US Bitcoin exchange-traded funds.
The theft adds to reputational challenges for Binance. Zhao pleaded guilty in 2023 to violating US anti-money laundering laws and stepped down as CEO. The company says it will bear the financial impact of the stolen funds, not its users, but now faces the task of restoring customer trust.
Sources: The Guardian Technology.