Binance is facing industry criticism after it was revealed that it only partially cooperated with requests to freeze assets following the Upbit hack late last month. Experts have stressed the need for a swift and coordinated system, arguing that the delayed response from major exchanges aids hackers in laundering funds.
Binance only cooperated with Upbit's request to freeze 17% of stolen assets.
On the morning of November 27th, Upbit, a major South Korean cryptocurrency exchange, was hacked, resulting in the theft of a significant amount of cryptocurrency. According to a KBS report, the hackers dispersed digital assets across over 1,000 wallets, utilizing bridges and swaps to make tracking difficult. Most of the funds reportedly flowed into third-party service wallets within Binance.
On the same day, the Korean police and Upbit requested an emergency freeze of approximately 470 million won worth of stolen Solana (SOL) tokens, claiming they had been transferred to Binance. However, Binance only froze approximately 80 million won, or 17% of the total, and held the remainder pending further fact-checking. The freeze was not completed until around midnight on November 27th, 15 hours after the request.
Binance responded with a general statement, stating, "While we refrain from commenting specifically on the ongoing investigation, we will continue to cooperate with the authorities." The hackers subsequently exchanged most of the SOL for Ethereum (ETH). Ethereum's high liquidity makes it easy to liquidate large amounts of assets.
Security responsibilities of global exchanges are under scrutiny.
This incident is being evaluated as a stark illustration of how lax security measures are at global exchanges. In a report released last month, the International Consortium of Investigative Journalists (ICIJ) pointed out structural security vulnerabilities, claiming that North Korean hackers and fraudulent organizations are repeatedly using major exchanges to move assets. Binance was also cited as an example of a case where large-scale illicit funds flowed in, despite being subject to oversight due to past legal action.
Against this backdrop, a warning from former Binance CEO Changpeng Zhao on December 11th once again sparked controversy. He warned users to be cautious, claiming that co-CEO Lee He's WeChat account had been hacked and used to promote a fraudulent meme coin. The scam is believed to have generated approximately $55,000 (approximately 81.27 million won) in illicit profits through a "pump-and-dump" scheme.
Cho Jae-woo, director of Hansung University's Blockchain Research Institute, emphasized, "To minimize damage, 'rapid asset freezing' immediately after a hack is absolutely essential. However, the current system and exchanges' response are overly passive." He added, "We need to establish a cooperative system in advance by introducing an emergency consultation body or hotline between exchanges." He proposed the establishment of an international consultative body with emergency freezing authority, emphasizing that market trust and user protection should take precedence over legal liability.
Urgent need to reform the system to restore trust
This incident is significant not only because of the simple hacking incident, but also because it has once again highlighted the fundamental challenges facing the cryptocurrency industry: preventing money laundering and protecting investors. In particular, amid criticism that major exchanges are unwittingly serving as exchange points for hackers, there is a growing need for a more sophisticated and swift international cooperation system.
๐ Market Interpretation
Binance's delayed freeze exposes the global exchange's lack of accountability and security cooperation. It's a reminder of the critical importance of the golden hour in responding to hacking.
๐ก Strategy Points
In the event of a hack, it is necessary to closely monitor exchanges where assets primarily flow in, and to establish information sharing and freeze agreements with major exchanges in advance.
๐ Glossary
- Asset freeze: A measure taken by exchanges to temporarily block withdrawals of assets used in crimes to prevent their movement.
- Bridge: Inter-blockchain connection technology that allows assets to be transferred between different blockchains.
Pump and Dump: A fraudulent technique that involves artificially raising prices and then dumping them at the peak to make a profit.
๐ก Want to know more? AI-prepared questions for you:
A. Binance immediately froze only 17% of the stolen assets, citing the need for further verification, and suspended the rest. While the exchange must consider legal liability and the possibility of litigation, this response has been criticized as overly passive.
A. Ethereum has a large trading volume and market size, so it's easy to lose track of large amounts of money at once or sell them in installments. Therefore, it's often used as a "currency exchange" coin for cashing out.
A. This involves establishing an integrated hotline or emergency consultation body between exchanges. In the event of a hack, specific assets are prioritized and then the facts are verified and addressed. This system allows major exchanges around the world to jointly respond through prior agreement.
TP AI Precautions
This article was summarized using a TokenPost.ai-based language model. Key points in the text may be omitted or inaccurate.
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