In what could be one of the largest cryptocurrency heists in history, Binance reported a security breach involving around $6.3 billion on Thursday. The cryptocurrency exchange said it had worked with its partners to freeze the assets, with around $3 billion in funds verified so far.
Changpeng Zhao, co-founder of Binance, said that user funds were safe and described the incident as something that "looked like a hack" targeting the cryptocurrency exchange. Co-founder Yi He also said that Binance would cover "all hacking losses".
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The company added that an initial investigation suggested the breach originated from a DevOps engineer's laptop. The compromised device "allowed an attacker to gain access to a service container and submit unauthorised withdrawal transactions".
"Our teams are working around the clock to resolve this issue safely and thoroughly. We are working closely with our law enforcement partners to confirm the identity of these criminals and bring them to justice," Binance said.
What is Binance?
Founded in 2017 by Changpeng Zhao and Yi He, Binance is the world's largest cryptocurrency exchange. Initially based in China, the company moved its operations out of the mainland following a crackdown on cryptocurrency trading by Chinese regulators. It faced similar regulatory challenges in Japan.
{{/usCountry}}Founded in 2017 by Changpeng Zhao and Yi He, Binance is the world's largest cryptocurrency exchange. Initially based in China, the company moved its operations out of the mainland following a crackdown on cryptocurrency trading by Chinese regulators. It faced similar regulatory challenges in Japan.
{{/usCountry}}In 2018, Binance announced plans to move its office to Malta, citing stricter regulations in Japan and China. However, in 2020, the Malta Financial Services Authority (MFSA) issued a public statement clarifying that Binance had never been authorised to operate in the country.
Without a fixed headquarters, Binance continued to expand its global operations, eventually reaching more than 180 countries, including the United States, Israel, India, Spain and Sweden.
Since its launch in 2017, the cryptocurrency exchange has remained under the scrutiny of regulatory authorities across the world.
Crackdown in US
In 2019, Binance stopped serving users in the United States amid regulatory concerns. The company restricted access for US users through IP-based restrictions and stricter Know Your Customer (KYC) requirements. It also said it had blocked attempts by US users to access the global version of its website, Binance.com, through VPNs.
To comply with US regulations, Binance launched a separate platform, Binance.US, in 2019. The platform offered users a limited range of features compared with its global counterpart.
However, Binance's regulatory troubles in the US escalated in 2023, when the Securities and Exchange Commission (SEC) sued the company, its founder Changpeng Zhao, and related entities BAM Trading and BAM Management on 13 charges.
The charges included operating unregistered exchanges, broker-dealers and clearing agencies, misrepresenting trading controls, and the unregistered offer and sale of securities.
The SEC also alleged that despite Binance's claims of blocking American users, "Zhao and Binance in reality subverted their own controls to secretly allow high-value U.S. customers to continue trading on the Binance.com platform."
"Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law," then-SEC Chair Gary Gensler said in 2023.
Later that year, Binance pleaded guilty to multiple federal charges, including violations of the Bank Secrecy Act, money laundering-related offences, operating an unlicensed money-transmitting business and sanctions violations.
The company agreed to pay around $4.3 billion in penalties. As part of the settlement, its founder Zhao stepped down as CEO and agreed to pay a personal fine of $50 million.
The many legal troubles for Binance
Apart from the money laundering case, Binance has faced legal action in connection with allegations that it facilitated Hamas's activities.
A separate lawsuit was filed in the US by families of American victims of the October 7, 2023, Hamas-led attack on Israel. The families alleged that Binance had facilitated Hamas's "terrorist activities" by providing a mechanism for the group to move funds.
Several other countries, including Italy, the Netherlands, Canada and Australia, have also imposed restrictions on Binance's operations.
The cryptocurrency exchange's operations in the European Union have also come under scrutiny after it lost regulatory permission and withdrew its application for a Markets in Crypto-Assets (MiCA) licence in Greece.
(With inputs from Bloomberg, Reuters)