Renowned crypto exchange start-up, Binance reported on Tuesday, May 7 that hackers stole more than 7,000 bitcoin from their platform. This is by far the largest volume worldwide. A worrisome security breach was discovered early that day malicious actors were seen to have been able to access user API keys, two-factor authentication codes and some other relevant information according to an open letter of Changpeng Zhao, CEO of Binance. The hackers, as a result, they were able to withdraw roughly $41 million in bitcoin from the exchange, according to a transaction published in the security notice.
This mishap was a couple of hours after a tweet by the CEO, which stated ‘the exchange was undergoing unforeseen server maintenance and funds are Secure Asset Fund for Users (SAFU fund).’ This may have been a loophole the miscreants capitalized on to make their moves. Zhao had also tweeted that the exchange would “provide a more detailed update shortly.”
On the upside the breach only affected the platform’s hot wallet, which contains roughly 2 percent of its total bitcoin holdings; although the exchange may not yet have identified all impacted accounts, Zhao further expressed in his letter. The CEO said, “All of our other wallets are secure and unharmed,” and then added
“The hackers had the patience to wait, and execute well-prepared actions through multiple seemingly independent accounts at the most opportune time. The transaction is structured in a way that passed our existing security checks. It was unfortunate that we were not able to block this withdrawal before it was executed.”
After the hack was executed, the withdrawal triggered internal alarms and Zhao said the exchange froze withdrawals right after the discovery. He warned that “the hackers may still control certain user accounts.” Trading will be re-enabled but deposits and withdrawals will remain suspended for the next week in which Binance intends to conduct “a thorough security review” of its whole system and data. According to the report, the exchange will use SAFU fund to cover the loss, which won’t impact users.
SAFU fund was initially launched to protect Binance’s users “in extreme cases,” according to prior notice and it stored in its own cold wallet, consisting of 10 percent of all trading fees absorbed by the exchange. Drawn from Zhao’s note, the exchange intends to act transparently and would appreciate user support at a difficult time like this.
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