Binance reports impact of about $6.3 billion after hack and net outflows of $3.64 billion
Key Facts
Binance estimated the total impact of its hack at about $6.3 billion, after the U.S. Federal Bureau of Investigation attributed the theft of more than $6 billion in assets from the exchange to North Korea on or around October 29. Binance said it had frozen about $3 billion in on-chain assets by its October 30 update. The exchange reopened withdrawals in stages on November 1, then announced that about 95% of the affected amount had been covered. These steps came as customers withdrew a net $3.64 billion after the service resumed, which Reuters estimated at about 2.1% of the exchange's assets. The figures put Binance's response to the incident alongside a test of users' confidence in their ability to access their funds.
Binance estimated the total impact of the incident at about $6.3 billion and said it had worked with blockchain partners to freeze affected assets. In an October 30 update, it said about $3 billion had been frozen on-chain by that point. The company's initial investigation found that the incident may have involved a compromised laptop belonging to a DevOps engineer, which gave the attacker access to a service container and enabled the submission of unauthorized withdrawal transactions. Binance added that it had found no evidence that private wallet keys had been leaked. In another update that day, the company said it had allocated more than $6.34 billion of its own funds to cover the losses, including $5 billion in the affected tokens themselves, and estimated that this covered about 80% of the affected amount at the time.
After withdrawals gradually resumed on November 1, Binance said it had covered about 95% of the affected amount, up from 90% in its previous update, and that the remaining 5% consisted of less liquid tokens. In the period after withdrawals reopened, the exchange processed $4.65 billion in withdrawals against deposits of $1.01 billion, for net outflows of $3.64 billion. Reuters reported the same figure, estimating that it equaled 2.1% of the exchange's assets. The news agency reported that Binance said the pace of withdrawals had begun to stabilize after the initial surge. This reflects the shift from a temporary suspension of withdrawals to net outflows from the exchange after it resumed operations.
Pressure on the exchange coincided with outflows from U.S. spot bitcoin funds, which lost $643 million on Friday, October 30, according to CoinDesk, citing Farside Investors. These were the largest daily outflows since June. In prices, bitcoin fell on Friday to a six-week low of $77,646, according to Reuters. The Associated Press also said the price dropped 3.2% on Thursday evening to below $79,000 as news of the incident emerged.
Signs of position trimming extended to derivatives markets. Open interest in BNB futures on Binance fell 5.31%, while the token's price declined 1.12% at the time of CoinDesk's report on November 2; the report said the gap indicated traders were closing positions. On Deribit, the three most traded bitcoin put options were those traded in the 24 hours before the report. Leading them was an option with a $58,000 strike price expiring on November 27. In the broader context of market pressure, a TRM Labs official told Reuters that more than $1.3 billion in leveraged positions had been liquidated by the time of the agency's report on November 2.
On Binance's next steps, the company said in a November 2 update that the balances of the 10 listed tokens were 100% backed, and that its zero-knowledge proof of reserves was ready for verification. It said it planned to take a broader snapshot on November 4 covering more tokens, estimating that preparing the full proof could take about 40 to 50 hours. On the U.S. data calendar, the September Job Openings and Labor Turnover report is due Tuesday, November 3, at 10 a.m. Eastern time. The October jobs report follows on Friday, November 6, at 8:30 a.m. Eastern time. These releases come as traders continue to monitor flows from the exchange and funds, as well as bitcoin price moves.