Binance hack: crypto investors urged to act unilaterally to recover assets

Hinesh Shah of Pinsent Masons was commenting after Binance disclosed that hackers had been able to access its systems and “submit unauthorised withdrawal transactions”. It said the attack impacted assets worth approximately $6.3 billion.

The company has said that it is taking steps to freeze affected assets, suspending withdrawals, and is working with law enforcement agencies and others to trace and recover the funds. It has said it will cover all losses and has reserved company funds for this purpose. However, Shah said investors should take unilateral action of their own.

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“The Binance attack highlights both the extraordinary scale of modern crypto theft and the importance of acting quickly when digital assets are stolen,” Shah said.

“The critical issue is speed. Stolen crypto can move rapidly between wallets, platforms and jurisdictions, requiring lawyers, investigators, exchanges and law enforcement to work together from the outset to trace assets and identify opportunities to freeze and ultimately recover them,” he said.

“Where investors have significant sums at stake, they should not simply wait for crypto exchanges and law enforcement agencies to complete their investigations. They should consider the legal remedies available to them, including using the courts to trace and freeze stolen assets before they move beyond reach,” Shah said.

“More broadly, the incident exposes the fragility of parts of the crypto ecosystem. If a platform as sophisticated as Binance can suffer a serious attack, regulators will inevitably ask what that means for smaller, less mature platforms and currencies. The repercussions could extend well beyond Binance, accelerating scrutiny of how the crypto sector protects both its infrastructure and its customers,” he added.

Cyber risk and insurance expert Ellie Ludlam, also of Pinsent Masons, said other companies may be able to learn lessons from the incident.

“It is currently thought that the breach started with a compromise of an engineer’s laptop which allowed the hackers to access Binance’s systems,” Ludlam said. “It is not yet clear whether the engineer was socially engineered, but we have seen a marked uptick in matters starting in this way, particularly with hackers pretending to be calling from an IT service desk and often with such incidents leading to significant and complex cyber breaches for our clients.”

“In the current cyber climate, it is important that companies remind their employees to be vigilant in respect of social engineering attempts and how to avoid falling victim to them,” she said.