Binance Hacked – $40.7 Million Stolen

The world’s largest cryptocurrency exchange by trading volume, Binance, became the latest victim of a cyber attack, when hackers stole over 7,000 BTC (about $40.7 million) on Tuesday, May 07. The news was announced by the exchange’s Chief Executive Officer Changpeng Zhao yesterday in a letter.

How the Hack Attack Took Place

Binance made the announcement that a large-scale security breach had been discovered, where hackers had been able to get through their users’ API keys (Application Programming Interface keys), 2-factor authentication codes as well as other possible information.

According to the letter issued by Zhao, a transaction that was published in the security notice showed that the hackers were able to get away with almost $41 million in BTC.

In the company’s official statement, it was revealed that the attacked had only impacted the crypto exchange’s hot wallet, which contains only about 2% of their total BTC holdings.

Zhao said that the hackers had executed a well-prepared attack via multiple accounts that had seemed independent of each other. He said that they had had the patience to wait and launch their attack at an opportune time. The CEO of Binance also said that the attacks had taken place in such a way that the hackers were able to bypass all the company’s security measures.

This attack set off internal security alarms, after which the exchange froze all withdrawals. Zhao stated that while trading would be re-enabled, all withdrawals as well as deposits had been put on hold for this week. He also cautioned users to be wary as the hackers could still have control of certain user accounts.

Next Steps

Binance stated that this week, it would conduct a complete security review of its systems and data. The company also stated that it would use its SAFU fund (Secure Asset Fund for Users) to cover this loss. The startup was also quick to assure that no users would be impacted by this hack attack.

The SAFU fund was launched by Binance to protect its users from such incidents, and it consists of 10% of all trading fees that the exchange has charged. This fund is stored in the company’s own cold storage wallet.

Market Reaction

The market’s reaction to this hack attack on the world’s biggest crypto exchange was immediate. The price of BTC dropped by $290, and other cryptocurrencies saw declines ranging from 1% to 10%. BNB (Binance Coin), Binance’s native token, dropped by more than 8%, however, has regained some of its losses and is currently down by 5.35%.