Cryptopia exchange breach saga continues – Binance freezes stolen funds


In the latest chapter of the continuing saga of Cryptopia, Binance has stepped forward and claimed to have frozen a portion of the stolen assets from the beleaguered crypto exchange. New Zealand police and the High Tech Crime Consortium (HTCC), an agency that deals with cybercrime, are presently conducting their investigation. All trading activities have been suspended, but contrary to previous reports, authorities have not locked down the Cryptopia facilities in Chistchurch.

Details of the exchange compromise have been scarce, but current estimates of the losses are said to be $3.6 million, primarily in Ether (ETC) and Centrality (CENNZ) coin offerings. While these amounts have yet to be confirmed, social media activists were quick to advise Binance, one of the largest exchanges in the crypto ecosphere, of addresses that had already been associated with the Cryptopia theft.

Binance does not accept fiat currency, but it does offer trading in over 400 token pairings. It so happens that Cryptopia, a rather small exchange, distinguishes itself from the competition by supporting over 800 tokens, a rarity and a reason why many suspect the hack to be an elaborate “exit scam” perpetrated by insiders.

Changpeng “CZ” Zhao, the talkative CEO of Binance, expressed consternation on Twitter, as to why hackers have continually re-directed stolen funds to his exchange: “[We] were able to freeze some of the funds. I don’t understand why the hackers keep sending to Binance. Social media will be pretty fast to report it, and we will freeze it. It’s a high risk maneuver for them.” Quick access to liquidity would seem to be the apparent reason for choosing Binance as a go-between, despite the probability of being frozen.

In any event, the amounts frozen, if early reports are correct, have been minimal. According to one reporter: “Zhao subsequently said staff had been quarantining the tokens, which appeared to arrive in several batches: 31,320 Metal (MTL) worth $7,830 to press time, and 49,766 KyberNetwork (KNC) tokens, with a value of $6,867 to press time.” These recoveries are less than 1% of the suspected losses.

Social media commentators were also quick to express their suspicions about the hack. It seems that, in the days leading up to the incident, data indicated that the exchange had been transferring large sums of tokens. Cryptopia representatives are unable to comment on this traffic due to the current police investigation, but a cloud exists over the proceedings. Was this event a cleverly designed exit scam or a real compromise?

Professional hacking gangs also seem to be hard at work in January. In addition to Cryptopia, the Ethereum Classic network suffered a “51-percent attack”, amounting to a $1.1 million loss. Surprisingly enough, the hacker returned $100,000 of his loot in what has been called a “white-hat gesture.” The hacking community’s behavior is bordering on “cocky” and almost “comical”, but these breaches are no laughing matter.

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