Binance Hack Highlights Security Risks of Crypto Treasury

On October 29th, a significant hack stole approximately $6.3 billion worth of digital assets from crypto exchange operator Binance. In a video statement, Richard Teng, Co-CEO of Binance, announced that the company would use its own funds to compensate victims, with $5 billion already spent on purchasing the affected assets. Most of the company's daily earnings are held in crypto assets, which are reinvested into the business and security.

The hack was initially believed to have originated from a compromised laptop used by a DevOps engineer, but further investigation revealed a much more sophisticated attack involving multiple breach points. The attacker exploited a known multi-signature protocol, EIP 7702, to gain on-chain execution approval of a hot wallet, bypassing Binance's normal approval controls. Within minutes of the attack, the hacker sold about 325 million USDT to market makers.

The incident has led to the freezing of an estimated $3 billion worth of digital assets, including $2.3 billion in stablecoins like USDT and USDC. To regain access to their assets, CFOs of firms with frozen stablecoins should gather and provide copies of account agreements, deposit and withdrawal addresses, transaction hashes, statements, and approval logs.

Treasury departments should ensure that their custodian commits to certain standards, including clear legal title to the company's assets, reviewable insurance and audit controls, and round-the-clock cooperation with stablecoin issuers and law enforcement. This incident highlights the importance of robust security measures and cooperation to protect crypto treasuries from such attacks.