Barely a month into the second quarter of 2019, over 7,000 Bitcoins have been stolen in a single transaction from Binance, the world’s largest crypto exchange.
In the first large scale Bitcoin heist of the year, hackers obtained user API keys, two-factor authentication codes and other types of data through the use of phishing and viruses.
Breach Occurred During Unscheduled Server Maintenance
According to a notice on Binance’s website, the breach was detected on May 7 at 5:15 p.m. UTC, around two hours after Founder and CEO Changpeng “CZ” Zhao tweeted that Binance would be undergoing unscheduled server maintenance that would affect the platform’s deposit and withdrawal systems.
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 a live video on Twitter, CZ discussed the possibility of reorganizing the Bitcoin ledger to essentially erase the heist. It was ultimately decided that this approach would not be pursued, with CZ citing the pros and cons of such a change and concluding that it would not be possible.
Losses Covered by Binance
Binance stated that they would be using their Secure Asset Fund for Users (SAFU) to ensure that users’ funds would not be affected by this heist. CZ discussed in his live video that the fund, which holds 10% of all of Binance’s trading fees, had more than enough Bitcoin available to cover the entirety of the loss.
Binance said that they would be conducting a security review of all of their systems and data, estimating that this process would take around a week to complete.
They chose to keep withdrawals and deposits disabled during their review, hoping to disincentivize the hackers from influencing Bitcoin markets. Trading was allowed to continue as normal.
Latest of Several Data Breaches in 2019
Although this is the largest Bitcoin heist this year, it is not the first.
Earlier this year, attacks on Cryptopia and Bithumb opened the chapter on digital heists of 2019, though neither of them experienced the same magnitude of loss as Binance.
The Binance security breach has confirmed that the threat of cybercrime is still very real.
Binance has had its own share of security issues in the past. Much like the recent data breach, around 7,000 Bitcoins were stolen from customers’ accounts in July 2018. Precise details surrounding this incident still remain unaddressed.
The latest breach to hit Binance was made possible by the availability of information like two-factor authentication codes and API keys to the hackers, something that the company is yet to explain clearly. All that’s known is that the usual attack vectors—phishing, viruses and malware attacks—are still too powerful to be ignored.
If there is to be an end to cybercrime, it won’t come until companies properly address their vulnerabilities long before a breach is devised.