What the historic heist of Binance means for crypto

0:00It is US midterm elections week and the results could really pack a punch for markets. But as we record this on Tuesday, November the 3rd, people are lining up to vote and all we can do is wait. But fear not, for the news gods have delivered another huge story to keep us busy. And it comes in the form of bizarro world crypto. Last week, one of the biggest and best-known crypto trading platforms, Binance, was hacked in the biggest heist of all time. Over$6 billion worth of crypto headed out of the door in half an hour. Drama. Today on the show, will crypto ever really be ready for prime time? This is Unhedged, the markets and finance podcast from the Financial Times.

0:47I'm Katie Martin, a markets columnist at FT Towers in London. And joining me in my underground lair is the very lovely Niku Asghari, our crypto reporter here at FTHQ. Niku, fun week? Really fun week. Crazy week. Yeah, kind of came out of nowhere, right? Yeah, completely. I woke up on Friday morning. It happened overnight on Thursday and as I woke up on Friday morning, it was all systems go. All the systems. What I want to do is go back a couple of weeks because you were in the refined environment of Lugano, Switzerland at a crypto event. And presumably the vibes were immaculate. Everything was happy in the world of crypto.

1:33Like how kind of gung ho were they feeling about the state of the world? Yeah, I was in Lugano for a very hardcore Bitcoin conference. and even though the price of Bitcoin is down, is flatlined for most of the year, everyone was very exuberant really. They were like, we're here to stay. You know, the other people outside of our system don't understand us. Like this crypto Bitcoin is going to eventually overtake the financial system. Like it was very, very hardcore. I mean, the end of the two days where there was a drone display with this anonymous British voice talking about how you're in the system and the drones were showing a hand being manipulated by strings and you're all puppets of the system.

2:18But if you take the orange Bitcoin pill, you will end up in Wonderland. Everything will be amazing. It was, yeah. Very normal. Very, very normal. Yeah. Yeah, it was all take the orange Bitcoin pill, swallow it whole and your life will be transformed. Okay, nice. how much chatter was there about cyber security for example a little bit there were a few panels on quantum and the quantum threat to bitcoin um and there were a few few panels and a few people talking about cyber security as well but it really wasn't like the first thing that was on people's minds yeah yeah walk us through what happened how is it even possible to suck 6.3 billion dollars out of an institution in half an hour.

3:07You've got to be North Korean to do it. You've got to be very sophisticated. We'll comment on to why we're blaming the North Koreans for all this soon. But like, what do we know about what actually happened? What have Binance said about what actually went wrong here? Because initially they said something vague about there being a problem with one Binance engineer's laptop. Yes. I mean, for all of the shiny techiness of crypto and blockchain, This has been a very fundamentally low-tech human employee error problem where the hackers created a fake company and fake employees of this fake company reached out to a software engineer working at Binance who did two job interviews, one with a fake HR person and one with a fake CEO.

3:55And in that second interview, the software engineer was given an assignment for the interview and they had to download. You see where this is going? They had to download some code or they had to download the assignment, which had malicious code in it. And once that was done, the hackers could use that to tap into two other laptops of two other software engineers. and then they used Binance's internal AI tool with the code that they had to All Systems Go last Thursday to drain all of the money. Two questions. First of all, haven't these people done basic cybersecurity training? Because I did the FT cybersecurity training the other day.

4:38Don't do that. Secondly, how can it be that someone with this kind of elaborate, slightly silly kind of scam, get into one engineer's machine and that enables them to drain that much money. Because in a proper bank, if you were able to get into one person's computer, you know, that's bad. But you can't drain billions of dollars out of it. Like there were just too many, too many blocks that stopped that from being even just physically possible. Yeah, it clearly wasn't. I mean, Binance also said that earlier in June, the first engineer, they had accidentally downloaded some sort of malicious code and Binance realised that.

5:19They changed the laptop, changed all of the controls. But at that point the hackers knew that this first engineer, his laptop had access to this sort of publishing code, withdrawal systems, all of the good systems that you need when you want to drain money. And so knowing that they used then the second laptop and the second fake job interview code to go and do it all. Yeah. If you're listening to this, you can't really hear me. My face, I'm pulling a kind of sort of face. That's bad. I mean, every company, we don't sit on billions of dollars, right? And we're running cybersecurity and they tell us, don't click links, don't click the email.

5:55Never mind. Yeah, we're humble journalists. Yeah, exactly. Never mind a company where your whole thing is about, you know, money and matching money and customer deposits. It's crazy. Give us a bit of context here. So like there's loads of crypto trading platforms out there, but like Binance is the biggie. Yes, yes, yes. There's no you can't overstate like how big a deal this is in the crypto world. Binance is the biggest in terms of liquidity, in terms of customers, in terms of sort of branding and public facing. We will maybe listeners and viewers will remember CZ, the co-founder who went to prison a few years ago.

6:30That was a very big deal. He was then pardoned by Donald Trump. They are by far the biggest crypto exchange in the world. And so on Friday, lots of people were asking, well, if this company that is the biggest, that has always said we're the most secure, your assets are very safe. If they can get hacked, what does that mean for the rest of us? Yeah, yeah, exactly. Does have a colourful past, doesn't it? Yes. So everyone calls him CZ, but his name is Xiaoping Zhao. Changpeng Zhao. Yeah. Sorry for mispronouncing. But yeah, he's done time. Binance has been in trouble before for lax money laundering standards.

7:06And the documents relating to this from the authorities talk about links with criminal organizations, terrorist organizations. It's had, you know, a checkered past, I think it's safe to say. And even at that time, they had to pay a fine. So they had to pay what then was a record four billion and a bit fine. And now they're facing another six billion and a bit whole. So it's been a bad few years financially. Yeah, yeah, exactly. So why are we blaming North Korea? Blockchain tracing companies and the FBI have said that the way that the hackers have now been laundering all the money, splitting it up, sending it to loads of different wallets out into the crypto cyberspace world has all of the fingerprints, all of the hallmarks of previous hacks that North Koreans have done or North Korea linked groups have done on other crypto exchanges.

7:56Yeah. So all roads are sort of leading back to North Korean linked groups. So say it is proven beyond reasonable doubt that North Korea has got something to do with this. What can the rest of the world do about that? Will there be any arrests? And what has North Korea actually said? In terms of arrests, no. I mean, that's a really distant possibility. The same North Korean group that is claimed to have hacked Binance also hacked another crypto exchange called Bybit last year and stole one and a half billion from them. and nothing happened. You can't do anything. It's North Korea, realistically.

8:31I mean, CZ today was talking about how, you know, the US is the only one, like the US government, that could talk to North Korea and do something about this. But I think that's a very, very, very distant possibility. Yeah. And is North Korea saying, you know, it's a fair cop, it was us? No, absolutely not. They came out and said, it's not us. Don't blame us. This has nothing to do with us. So there you go. Good drama. Yeah. so what was the reaction from finance to what happened because it froze withdrawals didn't it and then all of a sudden we have cz kind of everywhere talking about don't worry your funds are safe and my first thought on that was wait wait wait wait wait i thought cz after he pled guilty to being in charge of finance when there were all these lax money laundering anti money laundering standards and yeah he went to prison he came out of prison again i thought he wasn't supposed to be involved in binance anymore i thought he was just a bystander shareholder in the thing all of a sudden he seems to be quite in the mix he's very public yeah i mean we have with we have to mention here that he's in a romantic relationship with the co-head of binance so she was appointed in 2025 as co-chief executive of binance and i think you know when you're at home together it's very difficult not to talk about all these things right but for all intents and purposes like you said he is not supposed to be anywhere near the controls and do you know doing anything really to do with the company he's just a passive the majority shareholder but a passive one and yet he's out on x and he's doing interviews and such um really trying to use his sort of crypto clout if you like and i sort of hate myself for saying that but he is really like a big big name and face to reassure people that everything's fine and if you're not reassured by someone who's come out of prison and been pardoned by Donald Trump, then really what hope is there for all of us?

10:24But OK, so he's saying all your funds are safe. So the first thing they did was they stopped withdrawals. Right. So you couldn't take any. Nobody could take any more money out of out of Binance. Like what else did they do to try and kind of stop the damage? I mean, that that really was it. Right. Because the money is being withdrawn from Binance. So they're like, we're going to shut these gates. We're going to stop any more money coming out before we can see what the problem is and how to address it. And then slowly on Sunday, they started resuming withdrawals. So they started with some of the biggest crypto tokens and they moved on to US dollars and other quote-unquote real currencies.

11:01And they're doing this phased approach of opening the gates and letting people take out their assets. Yeah. And the rest of the crypto ecosystem did some quite interesting stuff as well in reaction to this. So there are a couple of really big what we call stable coins, which are kind of like normal dollars that live on the Internet. That's the really kind of condensed definition of this. And the two really big ones are Tether and Circle. And they said in response to this hack that they had frozen some of their tokens that they thought had been had been stolen so that they couldn't be used. Now, I remember the crypto bros mansplaining me at length about how the joy of crypto is that nobody can seize your assets and nobody can control them.

11:49They're yours and yours alone. You are sovereign in your ownership of crypto. Well, there are some caveats. Turns out, a little asterisk there. So how is this OK that it turns out that whoever runs Tether and whoever runs Circle can switch them off? Yeah. So they have in building the stable coins that they've built, they have these powers that they can stop like assets from theft or hacks from being moved. But it only applies to Sether and Circle. Like Bitcoin can't be frozen. ETH can't be frozen. And I mean, as the hackers sort of proved, they converted some of the tokens that they'd stolen into another stable coin that claims to be freeze free.

12:30So that's a great thing for hackers, right? Like we can move it into this money. you definitely can't freeze it and we'll move on. But yeah, Tether and Circle moved to freeze about$3 billion worth of the funds pretty quickly. Yeah. Proving that they have those powers. Yeah, interesting. Now, so say you have some crypto sitting in Binance somewhere. What has happened to it? Are people out of pocket? No. How come? Binance has made a very big show of saying all of the money will be repaid from Binance, that the customers won't be losing out. You have to remember, this is the biggest crypto company in the world, right?

13:08If suddenly they're saying, hey, this is your problem, not our problem, people are going to leave in droves. Right. So they are paying, in letting people withdraw their money, Binance themselves is repaying and reimbursing the people that have been affected by this from what they say is their own revenues. Extraordinary. Do they have enough, I mean, is this existential for Binance? Do they have enough money to do this? Well, they don't disclose any revenues, but people have done estimates based on their trading volumes, the percentage of fees that they take. And, you know, estimates range from like 10 billion to 20 billion of revenues annually.

13:42So no one's really concerned. No one is concerned about the solvency of Binance and their ability to pay this. So we'll see. But what does this all say about the crypto industry at large? So, you know, it's easy to sort of sit around and throw stones at crypto and say, oh, you got hacked and all this money got lost. But it's not beyond the realms of possibility that some AI agent or whatever could hack into the real normal banking system. And then all of a sudden I'm going to find this significantly less funny. Yeah. Like, what is the crypto industry saying about this? Are they just saying, look, we're the thin end of the wedge.

14:22This is coming to an established banking system near you. or are they, and I know they don't really do, humility in crypto circles, but is there a little bit of sort of humble pie here or a little bit of, okay, we screwed up and we need to take security more seriously going on? From Binance's side, yeah. I mean, they're investigating this and they're saying, and all the other exchanges are also saying, we're tightening up our security, we're checking everything. But the humble pie is a very, very thin slice, honestly. Like everyone else in the crypto world is really praising Binance for being so quick to admit what's happening, to stop withdrawals, being so clear in their communication.

15:02And they're really saying, like, good job, guys. This isn't existential. The price of Bitcoin hasn't really moved very much on the back of this. Amazing. Yeah, so the pie is very small. But that leads us to, doesn't it? So Binance has restarted withdrawals. You can take your money out if you want to. There was a loud sucking sound. People took out$5 billion. But like, no, things are pretty much all back to normal. I looked at the 24-hour inflows data just before this and$2 billion has gone back into Binance. So it really is, or at least it seems for now, business as usual, people are unfazed, they're getting their money back, no one's out of pocket, crypto prices haven't really moved.

15:45The bounce back ability of this thing is just off the charts. I don't understand how it does it. If someone got into a mainstream bank or a Wall Street bank and drained money like this, it would be just a gigantic crisis. But because it's crypto, it can just be over and done with in a week and we can all just move on to the next story. And you have to ask questions of the regulators, right? So Binance is only regulated by Abu Dhabi and only very recently. So they're really the only ultimate authority that they're going to have to answer to. Because the UK and Europe said, no, no, no, no, no, Binance.

16:18You cannot apply your trade here, which I'm going to say seems like a good idea at this point. Yeah, yeah, yeah. It's an unregulated, you can't use it here as a regulated. So I guess people got their money back this time or Binance has promised to give people their money back this time. But next time, can they, you know, how many$6 billion heists can they stand? So again, like you go back two, three weeks or whatever to Lugano in Switzerland, kind of Europe's home of crypto for some weird reason. They were all about their plan for world domination. Do you think this episode is going to dent that?

16:56Because they get knocked down and they get up again. Yeah, I think it absolutely has to, right? This is the biggest hack, not just of crypto, but of anything ever. And so if you're a banker or a regulator or anyone, you know, senior and serious, you have to look at this and say, like this is still risky, this is still scary, what does this mean? And do we want to touch it with any enthusiasm anytime soon? Do you want to go and work in it? Do you want to put your money in it? Like all of these questions, yeah, it makes sense to ask them. Niku, thank you for that rundown. We are all now no longer sad no-coiners.

17:34We've got coins in our brains. Thank you for that. We're going to be back in just one second with Longshot.

17:44Okie dokie, it is time for Long Short, that part of the show where we go long a thing we love or short a thing we hate. Niku Asghari, crypto person at the FT. What are you saying? I'm going long algae. Nice. Why? Because I love that in the midst of a potential return to war, soaring petrol prices, soaring food prices in the US, the president is fixated on the algae that will not go away. In the reflecting pool in Washington. It is his obsession and I love it. Do Americans call it algae? I think maybe they call it algae. Doesn't sound right to me. You spent time out there. I know, but I'm still British.

18:27You weren't thinking enough about algae slash algae. But now I'm obsessed. Yeah, I'm here for it. I am long beavers. Okay. So someone put up a load of signs in Poland to warn walkers of damage on walking routes caused by beavers, which have been reintroduced after almost going extinct over there. This is all according to a site called Notes from Poland. Anyway, you're going to guess what happened next. What did the beavers do? They chewed down the signs. Of course they did. So I am long Polish beavers. I like this. We're both long nature taking things down. It's beautiful. It's beautiful. It's calming.

19:10Niku, thank you so much for sharing your brain and your time. Listeners, Rob and I will be back on Thursday with all the lowdown from the midterms. So listen up then.