Suspected Binance hack: Tether and Circle freeze $1.79B in stablecoins

CZ's remarks remove some uncertainty but the main risk remains. He acknowledged the incident appears to be a hack, but the individual authorized to pledge Binance's funds has not commented. The freezing of stablecoins reduces the potential loss, but the ether that left Binance lacks similar protection. BNB serves as the most direct indicator of trader concern, and it is expected to remain under pressure until Binance commits to covering losses. Bitcoin and ether are declining alongside the broader market rather than due to issues specific to them, meaning they could rebound more quickly if Binance provides clear reassurance.

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Earlier report:

• Tether blocks $971M USDT linked to suspected Binance breach as crypto market declines

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CZ described the event as a hack and stated that user funds are secure. Tether and Circle have frozen a combined $1.79 billion, while Binance has not disclosed the amount it lost.

Key points:

• Binance co-founder Changpeng Zhao, known as CZ, said the exchange seems to have been hacked and that user funds are protected.
• Tether locked approximately $971 million in USDT and Circle locked approximately $823 million in USDC, for a total of about $1.79 billion.
• CZ stated that while he no longer operates Binance, as a shareholder he expects all user funds to be fully covered. This does not constitute a formal commitment from the exchange.
• Binance stated it is looking into a potential security issue. It has not verified the losses or the method of the transfers.
• Over $2 billion was transferred from Binance wallets to a new address, including approximately 167,000 ETH, which cannot be frozen.
• BNB declined around 6% to approximately $710. Bitcoin fell about 2% and ether about 3%.

On Thursday, October 29, Binance co-founder Changpeng Zhao said the exchange appears to have been hacked, coinciding with stablecoin issuers Tether and Circle freezing approximately $1.79 billion in tokens associated with over $2 billion that exited the exchange's wallets. Zhao, commonly referred to as CZ, stated that user funds are secure.

In an X post, Zhao said the activity does appear to be a hack on Binance. He expressed gratitude to Tether for freezing around $971 million in USDT and to Circle for freezing approximately $823 million in USDC. He further noted that while he no longer manages Binance, as a shareholder he expects all user funds to be fully covered. Since Zhao stepped down as CEO in 2023, his remarks do not represent a formal pledge from the exchange to reimburse losses.

Binance has been less definitive. According to Cryptowisser, the exchange said on X that its teams were aware of reports of a potential security issue and were actively investigating. It did not confirm a breach, the amount involved, or how the transfers occurred.

Cryptocurrency prices declined as the news emerged. Binance's BNB token, used for trading-fee discounts on the exchange and for fees on its BNB Chain blockchain, suffered the most among major cryptocurrencies. Cryptowisser price data showed it dropped nearly 6% to around $710. Bitcoin fell about 2% to near $79,400, and ether lost about 3% to approximately $2,280. According to CoinGlass data cited by Crypto News Flash, about $620 million in liquidations occurred within one hour as the reports surfaced, with approximately 97% being long positions.

Market news account Walter Bloomberg first circulated on-chain data indicating about $2.77 billion left Binance wallets across five blockchains. Coindoo, examining Etherscan, identified two large Ethereum transfers to a single newly created address. One transfer originated from a wallet labeled Binance 14 and contained approximately 167,000 ETH and about 1.6 billion USDT. The second transfer was 780 million USDC from a Binance hot wallet. On-chain investigators allege the receiving address was funded via Tornado Cash, a mixing service that obscures fund origins, although this claim is unverified.

The freezing is significant because it places a large portion of the stolen stablecoins beyond the attacker's control. Tether and Circle are able to block addresses through built-in controls in their token contracts, preventing frozen tokens from being transferred. The ether involved in the transfer, valued at roughly $380 million at current prices, lacks this protection, and frozen funds are not automatically returned to their owners.

The main questions now are the net loss for Binance after accounting for freezes, whether withdrawals proceed normally, and whether Binance itself commits to covering any losses. If the incident is confirmed to be anywhere near the reported magnitude, it would be among the largest cryptocurrency thefts ever.