Binance loses $3.6 billion after $6.3 billion crypto hack: What the massive outflow means for investors

(WiBinance, the world’s largest cryptocurrency exchange, saw a net outflow of $3.6 billion after it resumed customer withdrawals on Sunday, following a massive $6.3 Billion Cyber Theft attributed by the FBI and blockchain analytics firms to North Korean hackers. However, the withdrawal has so far failed to trigger a wider exodus from the platform, which continues to have a significant lead over its rivals.

The exchange said the movement of funds has eased after an initial surge in withdrawals. After Thursday’s hack, Binance temporarily suspended withdrawals to investigate the incident and stabilize its systems. It also pledged to pay customers in full, with users not suffering financial losses.

Despite the scale of the breach, several factors seem to have helped Binance retain customer trust: its quick response, regular public updates, determination to cover the stolen funds, and its huge market presence.

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Binance said it would bear the financial impact and not pass the losses on to customers. The exchange announced the replacement of about 95% of the stolen cryptocurrency.

Customers were withdrawing funds after Binance reopened withdrawals, but the total also included transfers between Binance’s own wallets. The exchange said the initial surge in withdrawals later moderated.

Binance has resumed withdrawals in phases after temporarily suspending them to investigate the breach and stabilize its systems. The first phase involved 15 tokens followed by withdrawals in 15 blockchain networks.

The FBI attributed the theft to TraderTraitor, a North Korean state-sponsored cyber unit. Blockchain analytics firms have also linked the attack to the group.

Binance said it used funds from its corporate treasury, emergency reserves and insurance funds to purchase replacement tokens. He said it covers about 95% of stolen property.

The The exchange reported $171 billion in assets under management since Oct. 28, according to a post on her social media account. In comparison, rival exchange OKX had around $29 billion, highlighting the gap between Binance and its closest competitor.

Why Binance customers are not leaving the exchange

Binance’s response to the hack appears to have played an important role in mitigating the immediate fallout. The company quickly suspended withdrawals, investigated the breach and coordinated with industry partners and US government agencies.

Several experts praised its speed of response and frequency of public updates to reassure customers.

Haseeb Qureshi, managing partner of venture fund Dragonfly, said the incident reflects how much the cryptocurrency industry has matured.

“On some level, it shows how much the industry has matured,” Qureshi said. “We’ve seen extraordinarily quick responses.”

Binance has also committed to absorb the financial impact of stolen funds, rather than pass the losses on to customers. It uses its company treasury, emergency reserves and insurance funds.

“Our commitment remains unchanged: Binance will bear the financial impact of the stolen funds,” the company said. “These losses will not be passed on to users.”

Another factor is the size of the company. With $171 billion in assets under management, Binance remains significantly larger than other cryptocurrency exchanges. Its size and reach make it difficult for some traders and institutions to immediately move their operations elsewhere.

Binance is gradually restoring withdrawals

Binance resumed withdrawals in stages on Sunday after freezing the service immediately following the hack.

The first phase included 15 tokens, including Ether and the two largest stablecoins, Tether’s USDT and Circle Internet Group’s USDC. This was followed by withdrawals across 15 blockchain networks, including Ethereum, BNB Smart Chain, XRP and Base.

However, not all reported outflows represented customers moving their money off the platform. Binance CEO Yi said some of the transfers were movements between the exchange’s own wallets.

The net outflow of $3.6 billion therefore needs to be seen in the context of both customer activity and internal fund movements. Binance said the initial surge in withdrawals has moderated.

How much did Binance lose in the $6.3 billion hack?

The cyber theft involved approximately $6.3 billion in cryptocurrency spread across 10 blockchains, including Bitcoin and Ethereum.

The breach reportedly involved a compromised employee’s laptop, raising questions about the exchange’s internal security measures. The FBI and blockchain analytics firms attributed the attack to hackers linked to North Korea.

US government entities, including the FBI and the US Secret Service, investigated the incident.

Read also | North Korean TraderTraitor Accused of Hacking Binance for $6.3 Billion: What We Know About It

Has the Binance hack affected the broader crypto market?

The immediate impact on cryptocurrency prices has so far appeared to be relatively limited. Most major cryptocurrencies changed less than 1% on Sunday.

Bitcoin, which accounts for about 60% of the total value of the cryptocurrency market, was trading at around $78,000, about 5% below its pre-heist level.

However, the incident has renewed concerns about the security of digital assets and the risks of relying on centralized cryptocurrency exchanges.

The attack also follows a series of security incidents involving crypto and financial companies. In September, hundreds of millions of dollars were drained from Bitget. Hackers also stole more than $100 million in bitcoins from wallets secured by Coinkite devices, while tampering with Ledger devices resulted in millions of dollars worth of losses.

Other recent cyberattacks affected prediction market Polymarket, South Korean financial firms Mirae Asset Global Investments and Daishin Securities, and Japanese currency trading platform GMO Internet Group.

Some security experts have also expressed concern that artificial intelligence tools could make cyberattacks more efficient, particularly by helping hackers with reconnaissance and social engineering. Some experts believe that North Korean hackers are incorporating artificial intelligence tools into their operations, although there is no confirmation that artificial intelligence was used in the Binance breach.

Will institutional traders move away from Binance?

The hack has prompted some trading firms to reassess how much capital they keep on the exchange, though not all plan to stop using the platform.

Quantitative trading firm SQS Trading had about a quarter of its trading capital on Binance. Its founder Eli Williams said the firm plans to cut that allocation by about a third.

However, the move would not include closing his positions or limiting his use of Binance as a hedging venue.

Williams said the company will monitor capital outflows and trading volume compared to other major exchanges before evaluating the longer-term impact.

Others have indicated that they have no plans to move away from Binance.

Justin d’Anethan, head of research at private markets consultancy Arctic Digital, said he was not bothered by the hack and would continue to use the exchange.

“When something seems irritated, it’s good to act quickly, but when something catastrophic happens, it’s better to postpone anything,” he said. “I have not moved away and I would not move away from Binance.

Read also | Binance resumes withdrawals after recovering 95% of $6.3 billion in crypto theft Binance