The announcement on Tuesday evening by Binance that it lost 7,000 bitcoins (BTC) worth nearly $41 million in one transaction to hackers who were able to obtain a large number of user API keys, 2FA codes, potentially other information from users, has sent shock waves throughout the cryptocurrency market.
The development first discovered on Monday comes after a recent rally in bitcoin in which the price of the cryptocurrency climbed as high as 9 per cent for a whole week. Minutes after the hack was announced, the price of bitcoin dropped by 3.1 per cent and further by 0.5 per cent on Wednesday according to the Bloomberg composite table.
Prices of other cryptocurrencies have also been affected. The Binance Coin for instance dropped by 8.05 per cent and is expected to move further down as the company release more updates.
Binance chief executive officer, Changpeng ‘CZ’ Zhao in a letter posted on the company’s website, the hackers had the patience to wait while employing a variety of techniques, including phishing, viruses and other attacks to execute well-orchestrated actions through multiple seemingly independent accounts at the most opportune time.
“It impacted our BTC hot wallet (which contained about 2 per cent of our total BTC holdings),” says Zhao. “All of our other wallets are secure and unharmed.”
He also noted that it is possible other accounts which were affected in the hacking incident are yet to be discovered.
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However, the company is not leaving anything to chance as it has frozen withdrawals following the discovery. This is subject to the outcome of a review Binance is commencing. The review is estimated to take about a week. While deposits and withdrawals will be suspended, trading will continue to allow investors to adjust their positions.
“Please also understand that the hackers may still control certain user accounts and may use those to influence prices in the meantime. We will continue to monitor closely. But we believe that with the withdrawals disabled, there isn’t much incentive for hackers to influence markets,” Zhao said.
In the meantime, the exchange has promised to cover the loss using its Secure Asset Fund for Users (SAFU). The SAFU will not impact users.
