Binance CEO Richard Teng announced that the exchange will cover all losses from a recent security breach using company funds, stating that customer assets remain safe. The incident involved a hack of Binance's own hot wallet rather than user accounts, with most user holdings stored in cold wallets. To address the theft, Binance has reserved over $6.34 billion, including $5 billion already held in the specific tokens stolen—USDC, USDT, BTC, ETH, and BNB—with the remainder being acquired through market and over-the-counter channels.
Teng revealed that the attackers utilized an EIP-7702 delegation mechanism to bypass standard approval controls on Ethereum, allowing them to execute smart contract code on the compromised wallet. The perpetrators also employed a self-destruct feature to erase tooling and traces, complicating the investigation. Blockchain analytics firms TRM Labs and Chainalysis have attributed the attack to the North Korean hacking group TraderTraitor. In response, Binance paused withdrawals to rebuild and retest its infrastructure, aiming to restore services by Sunday and publish a full proof of reserves by Monday.
The attacker continues to move funds, recently transferring approximately 5.19 million TRX (worth roughly $1.73 million) across multiple addresses on the Tron network. Meanwhile, decentralized lending protocol Aave unfroze its markets after initially pausing deposits and borrows as a precautionary measure. Aave founder Stani Kulechov confirmed that the protocol was unaffected and positions remained overcollateralized. Binance co-founder Changpeng Zhao noted that while this is the largest theft in dollar terms, it does not exceed Mt. Gox’s loss in Bitcoin volume, emphasizing that Binance’s ability to absorb the hit stems from retaining operating earnings in crypto.
This development underscores the critical importance of internal control systems when interacting with new blockchain standards like EIP-7702. By bypassing normal approval workflows, the attackers exploited a gap between technical capability and operational security protocols. The decision to pause withdrawals for infrastructure rebuilding highlights a reactive but necessary approach to maintaining trust, prioritizing system integrity over immediate liquidity access.
From a Market Structure perspective, Binance’s capacity to absorb a $6.34 billion loss without insolvency demonstrates the significant capital buffers maintained by major centralized exchanges. However, the attribution to state-sponsored actors like TraderTraitor raises ongoing concerns about geopolitical risks in digital asset custody. The successful mitigation of contagion effects, evidenced by Aave’s quick recovery and stable collateralization, suggests that current DeFi safeguards are functioning, though reliance on centralized entities for final settlement remains a systemic vulnerability.
