It was the biggest cyber heist in history.
Binance, the world's largest cryptocurrency exchanges, was hacked this week, with cybercriminals plundering more than $6 billion. Experts widely believe the hackers were a sophisticated unit within the North Korean military that has a track record of committing cyber heists.
The theft stunned the crypto industry and set off new fears about a sector that many critics deride as the "Wild West" of finance.
Here are 5 things to know about the spectacular heist.
So first, what are crypto exchanges?
They are akin to the New York Stock Exchange (NYSE) or the Nasdaq, but instead of trading stocks, investors turn to Binance and other crypto exchanges to trade digital assets such as Bitcoin.
A wide range of investors trade cryptocurrencies at these exchanges, from financial institutions and sophisticated traders, all the way to regular investors looking to make some money.
OK, so what happened this week?
At 4:05 p.m. Eastern on Thursday, hackers were able to access the accounts of investors who trade cryptocurrencies at Binance. It took only about 20 minutes for these hackers to make off off with just over $6.3 billion worth of cryptocurrencies.
Ari Redbord, the global head of policy at TRM Labs, a crypto research firm that has helped Binance trace and recover some of the stolen funds, calls it "the largest bank robbery in human history."
"Imagine a world where someone could walk into a bank and walk out with $6.36 billion in stolen funds and then move those funds at the speed of the internet," he says. "This is bank robbery in the age of technology."
But a lot of details about the heist are still unclear, including how exactly the hackers were able to hack their way into the trading accounts of investors at Binance.
Binance, working with other exchanges and partners, has been able to freeze about $3 billion in stolen cryptocurrencies, effectively preventing hackers from taking full possession of its digital assets.
The exchange has also said it will pay back any customers who were victims of the cyber heist — though it's not clear exactly how it will do that.
Why do experts believe it's North Korea?
The level of sophistication and speed of the hack all point to a North Korean military hacking unit widely known as TraderTraitor. The unit was also responsible for what was the previous biggest-ever cyber heist, the theft of $1.5 billion from crypto exchange Bybit last year.
"North Korea has built the most sophisticated cyber capabilities in the world. They have a cadre of teams of professional hackers who are part of their military," says TRM's Redbord.
"This isn't just a commercial hacker who's looking to make some money," he adds. "This is going to be used for weapons proliferation and other destabilizing activity."
What does this heist tell us about the safety of crypto exchanges?
Researchers say it's too early to determine whether there were any major flaws with Binance's security systems. But they say the heist is a clear sign of just how sophisticated North Korean hackers are.
Meanwhile, crypto critics say the way Binance and other crypto exchanges are set up deserve scrutiny.
A unique feature of crypto exchanges is that people can buy and sell digital currencies such as bitcoin — and leave them with the exchanges for safekeeping.
This dual trust in the exchange makes them mighty tempting targets for hackers. And what's more concerning for critics, crypto exchanges also don't have to follow the same strict regulations that govern established Wall Street firm.
"You may trade on the New York Stock Exchange, but you don't keep your funds with the New York Stock Exchange. You keep it with your broker — and your broker is audited and regulated by the SEC (Securities and Exchange Commission)," says Amanda Fischer, policy director and chief operating officer at financial consumer advocacy group Better Markets. "And your broker has to pay for insurance that will make customers whole in the event that there's a cyber attack."
"So the regulatory framework for crypto is much weaker than what investors in the US enjoy in other markets," says Fischer.
Though Binance has promised to pay back customers who lost funds, it is not necessarily bound to do so according to current regulations. And many critics worry that smaller exchanges could struggle to pay back their investors in case of a hack, leaving these traders to suffer the consequences.
Doesn't this reinforce the crypto sector's Wild West reputation?
For many crypto critics, it does. They warn the lack of clear regulations for crypto executives could lead to perverse incentives at these exchanges.
In 2022, FTX — then the biggest crypto exchange — got into financial trouble after a period of intense volatility in the crypto markets, and the exchange dipped into their own customers' funds as it desperately tried to rescue itself. The company collapsed, and its CEO and founder Sam Bankman-Fried was sentenced to 25 years in prison for fraud among other charges.
"If a trade goes bad, it can become almost irresistible to dip into those client funds. Just this one time is what they say, to cover their losses," says Fischer at Better Markets. "But we know that that can cascade into catastrophe for investors."
It's another reason why the massive cyber heist of Binance is raising so many alarms.
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