Binance – world’s largest cryptocurrency exchange by daily volume had a security breach on May 7, 2019 with hackers stealing over $41 million worth of Bitcoin (7000 BTC) from its hot wallet that is, its crypto wallet connected to the internet and used to process transactions.
According to an official statement by the exchange CEO, Changpeng Zhao (CZ) the 7000 bitcoins were withdrawn by hackers using variety of techniques including phishing, viruses and other attacks; just as he explained that the online theft affected about 2% of the company’s total bitcoin holdings.
In his reassurance statement, the CEO highlighted an upside noting that users of the exchange and investors will not be affected by the loss as the company is insured and will utilize its Secure Asset fund for Users (SAFU) to cover the loss.
His statement further reads:
The theft affected about two percent of our total bitcoin holdings in hot wallets. All of our other wallets are secure and unharmed. The hackers had the patience to wait and execute well-orchestrated actions through multiple seemingly independent accounts at the most opportune time. Once executed, the withdrawal triggered various alarms in our system. We stopped all withdrawals immediately after that.
Zhao also mentioned that crypto exchanges like Coinbase had blocked deposits from addresses linked to the hack with conversations ongoing with other exchanges to see if the funds could be rescued or if the stolen Bitcoins can be blocked from further operations.
Expectedly, all deposits and withdrawals on the exchange have been suspended for a week (till Monday 13/05/19), as developers work on investigating and fixing the bug.
Crypto Market Unaffected: BTC hits $6000
The hack had no real effect on the cryptocurrency market and assets as only a 4.2 percent drop in Bitcoin price was noticed in the Asian market when the news of the hack made headlines.
However at later hours, Bitcoin (BTC) broke the $6000 resistance level to trade at $6,059 as at press time and up 3.63% on the day; hence showing more indications of independence over FUD and negative news. Other coins also posted gains
This latest hack is one of many hacks and security threats posed by cyber criminals targeted at cryptocurrency exchanges with about $950 million lost to these crimes. Notably exchanges in Japan and South Korea have been the major casualties accounting for 58% of the total loss with some enthusiasts pointing fingers at government involvement and recruitment of hackers in these cases.
Need and Importance of Back up Security
Before now many had bullish opinions about Binance haven stood firm despite a spate of hack attacks on other exchanges. This latest breach emphasizes the need for extra security, cold storage back up (that is, offline flash drive-like physical wallets which are less vulnerable to hacks). As any info connected to the internet is vulnerable.
Binance on its part has always emphasized this and performed scheduled checks with top most security and transparency. However, hot or online wallets despite strict protocols and high standards are still susceptible to sophisticated attacks.
Most exchanges have major funds offline in cold wallets to cover up for cases of security breach. Check out our article on wallet security and crypto safety.
Do you own a cold/hardware wallet? What crypto security measures do you apply?