Binance, the world’s largest cryptocurrency exchange, has announced that it has covered 95% in losses following a large-scale cyberattack, in which approximately $6.3 billion in digital assets were stolen. To replenish its reserves, the company utilised its own funds, the futures trading insurance fund and the SAFU reserve fund. On Sunday, 1 November, the exchange began a phased resumption of cryptocurrency withdrawals, whilst promising to fully compensate clients for their losses.
- Binance covered 95% in losses following the hack, which amounted to $6.3 billion.
- SAFU reserves, insurance funds and corporate funds were used to cover the costs.
- The ten leading cryptocurrencies are already fully backed by reserves.
- The exchange has begun to gradually resume cryptocurrency withdrawals.
- The FBI has linked the attack to the North Korean group TraderTraitor.
Binance has already replenished its reserves by nearly $6 billion
On 31 October, the cryptocurrency exchange announced that it had managed to cover approximately 90% of the losses caused by the cyberattack on 29 October. Early on 1 November, Binance issued a new statement indicating that this figure had risen to 95%.
In total, the company has set aside over $6.34 billion in corporate funds to compensate for losses and purchase the cryptocurrencies required to restore the collateral backing client balances.
It is important to note that this is not primarily about recovering the assets directly stolen by hackers. Binance is using its own resources to purchase cryptocurrencies and replenish the reserves that underpin its obligations to customers.
According to the company, Full support has now been restored for ten cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Tether (USDT), BNB, Solana (SOL), USD Coin (USDC), XRP, USD1, RLUSD and Zcash (ZEC).
The remaining 5% losses relate to less liquid digital assets, which are more difficult to acquire in large volumes without significantly affecting their market price.
To complete the recovery, Binance continues to purchase the necessary tokens both on the open market and through over-the-counter transactions with major counterparties.
The company insists that the financial consequences of the attack will not be passed on to users.
Where did Binance get the billions of dollars for compensation?
To cover the losses, the exchange drew on three sources of funding at once.
Firstly, Binance’s own corporate reserves, which enabled it to promptly begin purchasing the stolen cryptocurrencies.
Secondly, it is part of the Futures Insurance Fund. These funds are usually used to cover risks when closing out positions on the futures market.
The company stated that it had raised only part of the funds in excess of the required level for the fund.
The third source was the Secure Asset Fund for Users (SAFU) — a special reserve set up by Binance in 2018 to protect users in emergency situations, particularly during major cyber-attacks.
According to a report by Reuters, the co-head of the exchange Ji He announced that half of SAFU’s reserves would be used to deal with the aftermath of the hack.
Binance has promised to restore the fund to approximately $1 billion at a later date, in order to maintain financial protection in the event of future incidents.
The use of several contingency measures at once enabled the company to quickly cover the bulk of its losses, whilst at the same time highlighting the scale of the financial burden caused by the attack.
Binance has begun resuming cryptocurrency withdrawals
Following the hack on 29 October, Binance temporarily has suspended withdrawals to carry out safety checks and prevent further losses.
On the morning of 1 November, the exchange began gradually resuming operations. Bitcoin withdrawals were the first to become available. The next stages will see the resumption of trading in Ethereum, BNB, Solana, XRP, Dogecoin and other cryptocurrencies. Overall, the first phase covers a range of blockchain networks, including Bitcoin, Ethereum, BNB Smart Chain, Tron, Solana, Arbitrum, Base and others.
The availability of a particular asset will depend on the network through which the user makes the transfer.
Binance has warned that temporary delays may occur during the recovery period due to increased traffic on the platform. However, account top-ups remained available even whilst withdrawals were suspended.
The FBI has accused North Korean hackers of a record-breaking cyberattack
On 29 October, Binance suffered a cyberattack during which the attackers stole cryptocurrencies worth approximately $6.3 billion.
According to estimates by blockchain analytics experts, the hackers withdrew the bulk of the funds in around 20 minutes.
Co-CEO of Binance Richard Teng It was reported that the attackers may have gained access to internal systems via a compromised employee’s laptop. The investigation also revealed signs of malware being used to cover their tracks.
On 31 October, the US Federal Bureau of Investigation stated that the North Korean hacking group TraderTraitor was behind the attack.
According to the FBI, members of the group have already begun converting some of the stolen assets into Ethereum for subsequent money laundering via decentralised financial services.
North Korea has traditionally denied that state bodies are involved in cryptocurrency thefts.
Whilst replenishing its reserves, Binance is working with law enforcement agencies and other companies in the crypto industry to track down and freeze the stolen funds.
According to Reuters, as at 30 October, the whereabouts of assets worth approximately $3 billion had been established. However, tracing or freezing these funds does not guarantee their eventual return to the exchange.
Binance has promised to publish a detailed report on the causes of the breach and the findings of the investigation once the audits have been completed.
The resumption of withdrawals and the replenishment of reserves reduces the immediate risks to customers; however, the question of how the perpetrators were able to gain access to billions of dollars’ worth of assets remains central to the ongoing investigation.
