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Binance Hack of About $6.4 Billion Shows Why Offshore Exchanges Need US Oversight, CFTC Chair Says
Per Decrypt, about $6.4 billion was stolen from Binance, and CFTC Chair Michael Selig cited it to argue offshore crypto exchanges should register with the CFTC and meet US-grade security standards. Binance says it set aside $6.34 billion to cover losses and assures users their assets are safe, while saying its probe found more points of breach.
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What happened: a regulator uses the Binance case as an example
Per Decrypt, Commodity Futures Trading Commission (CFTC) Chair Michael Selig told CNBC on Friday that the roughly $6.4 billion Binance theft "proves our exact point," meaning that the crypto market rules the agency proposed this month are needed. Everything in this article comes from Decrypt's reporting.
Decrypt reports that Selig said the problem is unregulated offshore exchanges (trading platforms operating outside the US), which lack the safeguards found in US financial markets. He put forward a "federal option" under which such platforms would register with the CFTC and follow the same security standards as US markets.
How the hackers got in: the account is still evolving
Per Decrypt, Selig said the attack did not break the Ethereum blockchain or its smart contracts (programs that run on a blockchain). Instead, it exploited a vulnerability he believed was "introduced from someone's laptop," something that also happens in traditional markets.
However, Decrypt points out that Binance initially pointed to the compromised laptop of a DevOps engineer (someone responsible for software development and systems operations). On Friday, Binance said its investigation had found "additional points of breach." CEO Richard Teng called it "a more complex attack process" that "did not simply use one engineer's permissions."
Decrypt also reports that the attacker used the Ethereum feature EIP-7702 (which lets ordinary wallets run smart contract code) with 50 pre-signed authorizations. This turned one Binance hot wallet (a wallet kept online for everyday fund movements) into a "sweeper" that drained the assets inside. Decrypt says TRM Labs stated that the broader breach points to a compromise of Binance's signing infrastructure (the systems used to authorize transactions), not a weakness in any blockchain.
| Aspect | What the reporting says |
|---|---|
| Selig's account | He believed the vulnerability was "introduced from someone's laptop," and that Ethereum and its smart contracts were not broken |
| Binance's latest account | Investigation found "additional points of breach"; the attack process was more complex and did not simply use one engineer's permissions |
| TRM Labs | Points to a compromise of Binance's signing infrastructure, not a blockchain weakness |
| On-chain method | EIP-7702 and 50 pre-signed authorizations turned a hot wallet into a "sweeper" |
| Investigation and attribution | The US Secret Service and FBI have opened a probe; TRM Labs and Chainalysis link the theft to North Korea's TraderTraitor group |
Regulatory background and what it means for ordinary readers
Decrypt reports that the CFTC did not wait for Congress and is advancing its own crypto rulemaking. It has sent the White House proposals that would define event contracts (contracts that pay out depending on the outcome of an event) as "swaps." It has also floated a plan to bring crypto exchanges under federal oversight. This is part of a broader shift in which regulators have taken the lead after the Clarity Act stalled in the Senate.
Selig also said crypto funds can move much faster, and attackers can use tools such as Tornado Cash to obscure their trail. But he argued that transactions can be traced on the blockchain, which he said gives regulators "a lot of potential to be really cop on the beat here."
Decrypt calls this the largest exploit in crypto history. Binance has set aside $6.34 billion to cover losses and assures users their assets are safe. The report does not say whether Selig's proposals will ultimately be adopted or how they would affect users; for now they remain proposals.
Frequently asked questions
What did CFTC Chair Selig say?
Per Decrypt, he told CNBC that the roughly $6.4 billion Binance theft "proves our exact point." He argued that offshore exchanges could register with the CFTC through a "federal option" and follow the same security standards as US markets.
Was this attack a flaw in Ethereum?
Per Decrypt, Selig said the attack did not break Ethereum or its smart contracts. TRM Labs also said the breach points to a compromise of Binance's signing infrastructure, not a weakness in any blockchain.
What is Binance's update on how the breach happened?
Decrypt reports that Binance first pointed to a DevOps engineer's compromised laptop. It later said its investigation found "additional points of breach," and CEO Richard Teng called it "a more complex attack process."
Who is believed to be behind it?
Per Decrypt, TRM Labs and Chainalysis have tied the theft to North Korea's TraderTraitor group, and the US Secret Service and FBI have opened a probe.
Are users' assets safe?
Decrypt reports that Binance has set aside $6.34 billion to cover losses and assures users their assets are safe. This is Binance's own statement.
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