“I felt a great disturbance in the Force. As if millions of voices suddenly cried out in terror and were suddenly silenced. I fear something terrible has happened.” – Obi-Wan Kenobi, Star Wars: Episode IV – A New Hope (1977)

That’s what it felt like Tuesday evening as the first reports began to trickle in. Binance – the bastion of Bitcoin trading, the sanctum of #SAFU – had been hacked.

And not just hacked, mind you, but hacked – with a capital Holy Shit.

The first glimmer that something might be amiss at Binance appeared around noon EST as CEO Changpeng “CZ” Zhao announced on Twitter that the exchange had to undergo “unexpected server maintenance.”

Have to perform some unscheduled server maintenance that will impact deposits and withdrawals for a couple hours. No need to FUD. Funds are #safu. — CZ Binance (@cz_binance) May 7, 2019

In exchange-speak, that usually means “Things are FUBAR. Please stand by.”

Sure enough, a few hours later, Binance’s beleaguered leader broke the bad news that the exchange had been hacked.

Not the best of days, but we will stay transparent. Thank you for your support!https://t.co/Y1CQOatEpi — CZ Binance (@cz_binance) May 7, 2019

What We Know So Far

Based on the security breach update posted on the Binance blog, here is what we know so far:

At 5:15 pm local time on Tuesday, the Binance crypto exchange was the victim of a “large scale security breach.” The hackers were able to withdraw approximately 7077 bitcoins (BTC) in a single transaction – roughly $41.8 million at Bitcoin’s current price. In addition to the funds, the hackers were also able to access large quantities of customer data, including API keys, 2FA codes, and “potentially other info.” ONLY Binance’s BTC hot wallet was impacted.

As far as how the hackers were able to breach the system, the blog post describes a methodical multi-pronged attack that used multiple methods of attack, including phishing and viruses.

The hackers had the patience to wait, and execute well-orchestrated actions through multiple seemingly independent accounts at the most opportune time.

In a live AMA session yesterday, Zhao said that the hack was one of the most advanced he’d seen, as he explained:

[It was] a very advanced, persistent hacking effort. They used both external and internal methods to ‘trap a lot of fish’ and get a lot of user accounts. The hackers [were] very patient, so they [didn’t] move as soon as they [had] one account. They waited for when they [had] a very large number of accounts and they waited until they got very high net worth accounts.

User Funds are #SAFU

Binance has stressed repeatedly that user funds will not be affected and that all losses stemming from the hack will be covered by the exchange’s #SAFU fund.

The #SAFU fund (Secure Asset Fund for Users) is an emergency insurance fund that was established in July 2018 to provide protection for users’ funds.

To protect the future interests of all users, Binance will create a Secure Asset Fund for Users (SAFU). Starting from 2018/07/14, we will allocate 10% of all trading fees received into SAFU to offer protection to our users and their funds in extreme cases. This fund will be stored in a separate cold wallet.

The Binance team is now focused on “rebuilding and recovering the system” – a process that is estimated to take about a week to complete. Withdrawals and deposits will remain disabled during that time.

I’m Justin Sun…I’m Here to Rescue You!

In the wake of the hack, offers have been pouring in from exchanges and individuals pledging support to help cover the losses.

Justin Sun, the founder and CEO of TRON (TRX), was one of the first to publicly offer his support. Less than two hours after the hack was announced, he offered to deposit 7000 BTC worth of USDT to cover losses.

Reactions to Sun’s largesse were mixed, ranging from grudging respect to outright mockery:

All he said he would do is deposit USDT and buy coins he already has a vested interest in. Read closer. Everyone lining up to fellate Justin over this "good deed" is missing the true intention behind this nonsense: Marketing. — Hrafnagaldr (@Hrafnagaldr1) May 8, 2019

They're already covering it with their SAFU Fund – you can stop with the marketing tactics. pic.twitter.com/ZYi9p5icmj — Anthony Sassano (@sassal0x) May 8, 2019

This tweet is only 74% backed — ⛏Crypto Christopher Walken🥃 (@cryptochrisw) May 8, 2019

For his part, Zhao maintains that Binance will be able to cover all of the losses through the exchange’s #SAFU fund and has requested that any donations earmarked for the recovery effort be redirected to the charities supported by Binance Charity instead.

He noted that Binance is working with Coinbase and several other crypto exchanges to block deposits from the hacked Bitcoin addresses.

How is the Binance hack different from other exchange hacks and how will it impact the market? Follow us on Twitter and let us know what you think!

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