Binance Says It Covered Losses From Security Incident With More Than $6.34 Billion and Captures Reserves for 198 Tokens

Key Facts

Binance said on November 12 that it had completed coverage of assets affected by a security incident, and said it had allocated more than $6.34 billion in company funds to cover the losses. In the same update, it disclosed a new proof-of-reserves snapshot taken at 00:00 UTC on November 12, covering 198 tokens. The two steps update the funding of affected assets and transparency around customer balances after the incident. The platform said it bought the affected tokens through market channels and over-the-counter trading. It added that the funding combined partial use of the SAFU Fund, part of the futures insurance fund and the company treasury.

Binance said it would replenish the SAFU Fund to bring it back to about $1 billion, keeping it as an emergency reserve to protect users. The platform said on November 4 that it had recovered about 98% of the affected assets and was continuing to buy the remaining assets through the market and over-the-counter trading. In a November 2 update, it said it had covered about 95% of the affected amount, and that the remaining 5% consisted of tokens outside the top ten. It also said then that the ten assets, including BTC, ETH, USDT and BNB, were fully backed at 100% in the October 31 snapshot. The November 12 announcement places completion of the coverage in the context of the gradual funding steps the platform had announced in previous days.

The November 12 snapshot expands the scope of the reserves report to 198 tokens, according to Binance. The platform says its proof of reserves shows the assets it holds on behalf of users, with the aim of demonstrating 1:1 coverage of their balances. The snapshot's value, according to its explanation, is calculated based on asset holdings in customer accounts at a specific date and time. Its system allows users to verify that their account assets are included in the snapshot without disclosing their individual balance, using a Merkle tree and zk-SNARK proof. The November 4 snapshot covered 44 tokens, compared with 10 in the previous snapshot, while the latest snapshot covers 198 tokens.

Binance said generating the complete zero-knowledge proof for the new snapshot is expected to take about 40 to 50 hours because of the computational workload. Once it is complete, holders of the affected tokens will be able to independently verify that their balances are backed by at least 1:1. The platform's estimate on November 4 for generating the complete proof for the previous snapshot was longer, at about 50 to 60 hours. Completion of the proof means independent verification of coverage will become available to the users concerned, according to the platform. Binance did not announce a specific calendar date for publishing the complete proof in the update.

In the context of the incident, Binance said virtual assets worth about $6.34 billion were affected, and that about $2.85 billion had been frozen or intercepted, according to its initial update. On November 12, it announced that it had completed coverage of the affected assets, after saying in a November 4 update that recovery of the remaining portion was ongoing. It also said on November 2 that the portion represented 5% of the affected amount and consisted of less liquid tokens outside the top ten. These figures distinguish the value of the assets affected by the incident from what Binance said had been frozen or intercepted in its initial update. The subsequent coverage announcement confirmed that the platform had used funds from multiple sources to cover the losses.

In the market on November 12, Bitcoin closed at $71,460, while USDT against the dollar closed at 0.99888, according to EL7 data. The two closes coincided with the date of the new reserves snapshot, but they do not establish the reason for changes in customer balances on the platform. The snapshot records asset holdings in customer accounts at a specific time and does not by itself show whether a balance movement resulted from buying another asset or transferring funds to external wallets. Binance said it would continue reopening withdrawals in stages. It added that it would issue further updates once developments were confirmed, without specifying a date.