Blockchain in Binance Ecosystem Paused on Irregular Activity

Olga Kharif and Sidhartha Shukla, Bloomberg News

The Binance Exchange application for download in the Apple Inc. App Store on a smartphone arranged in Dobbs Ferry, New York, U.S., on Saturday, Feb. 20, 2021. Bitcoin has been battered by negative comments this week, with long-time skeptic and now Treasury Secretary Janet Yellen saying at a New York Times conference on Monday that the token is an “extremely inefficient way of conducting transactions.” Photographer: Tiffany Hagler-Geard/Bloomberg , Bloomberg

(Bloomberg) -- An already bad year for cryptocurrencies took another turn for the worse after a $568 million hack affecting Binance Coin became the latest in a string of security incidents to buffet digital assets.

An exploit occurred on a bridge between blockchains and the issue is “contained now,” Changpeng “CZ” Zhao, the billionaire co-founder of Binance, the world’s biggest crypto exchange, said on Twitter on Friday.

Security specialists at crypto firms BlockSec and Paradigm said blockchain data indicated somebody had hacked two million tokens of Binance Coin -- also known as BNB -- in two transactions. That’s equivalent to about $568 million at current prices for the virtual currency.

About $87 million was moved out of the Binance ecosystem but the hacker was unable to spirit away the rest of the funds because the Binance Smart Chain was suspended, according to BlockSec Chief Executive Officer Yajin Zhou. The blockchain was later restarted. The remaining tokens are on the wallet the hacker used, but have been frozen on the Binance network, Zhou said.

Binance’s Zhao in an earlier post on Twitter said the “impact estimate” of the incident was around $100 million. At least $7 million of stolen funds has already been frozen, a spokesperson for the Binance-backed BNB Chain said.

About $2 billion has been lost in crypto hacks this year, many perpetrated by North Korea-linked groups. Cross-chain bridges used to transfer tokens across blockchains are a popular target, turning them into a major vulnerability.

The Binance ecosystem is among the highest profile to be buffeted. Zhao said on Twitter that “in all likelihood, Binance will cover any fund that the hackers get away with.”

BNB Chain said it’s working with security services to freeze transfers of stolen funds. Binance Coin fell as much as 3.3% on Friday and was trading at around $284 as of 7:40 a.m. in London.

Binance Coin is the native token of BNB Chain and was launched through an initial coin offering in 2017. It was originally based on the Ethereum network.

The crypto sector has been pummeled by a $2 trillion rout as well as the litany of hacks. The latter have become a global concern -- for instance, envoys from South Korea, the US and Japan on Friday agreed to redouble efforts to block North Korea’s nuclear and missile financing through crypto theft.

The wider crypto markets took the latest developments in their stride. Bitcoin was little changed at just below $20,000 on Friday.

(Updates with latest hack estimates from the first paragraph.)