Binance Completes Coverage of $6.3B Hack Losses and Releases Expanded Proof of Reserves Snapshot
Key Takeaways
- •Binance stated it has fully covered customer assets stolen in an October 29 hack that resulted in the theft of approximately $6.3 billion, using more than $6.34 billion of its own funds.
- •The compensation was drawn from three sources — the Secure Asset Fund for Users (SAFU), surplus from the Futures insurance fund, and the corporate treasury — with recovery reaching 90% by October 31 and 98% by November 4.
- •Binance plans to restore the SAFU emergency fund to nearly $1 billion after partially drawing on it during the recovery process.
- •A new Proof of Reserves snapshot published on November 12 expanded coverage from 44 to 198 crypto assets, though the company noted the snapshot is a publication of reserve data rather than a complete verification process.
- •The full zero-knowledge proof, estimated to require 40-50 hours to generate, will let users verify their inclusion in the reserve calculation and confirm backing at 1:1 or above, but Proof of Reserves cannot independently prove Binance's solvency or account for off-chain obligations.
Binance has hit a significant recovery milestone weeks after one of the biggest security incidents in cryptocurrency exchange history. The exchange says assets affected by the breach are now fully covered and has released a fresh reserve snapshot to support its backing claims, while the cryptographic verification needed to fully validate those figures is still being prepared.
Binance Finishes Replacing Assets Lost in $6.3B Security Breach
Binance stated it has finished covering assets impacted by the security incident on October 29, which led to the theft of approximately $6.3 billion in funds. Rather than passing the losses on to customers, the exchange deployed more than $6.34 billion of its own money to offset them.
The compensation was divided into three funding streams: allocations from the Secure Asset Fund for Users (SAFU), surplus funds from the company's Futures insurance fund, and the Binance corporate treasury. The company then began restocking cryptocurrencies through both the regular market and over-the-counter transactions.
Recovery stood at 90% by October 31 and reached 98% by November 4, except for less liquid tokens, which took somewhat longer to replenish. The company also stated that it will return the value of SAFU to nearly $1 billion after drawing partially on the emergency fund during the process — a detail that matters to users because SAFU functions as the exchange's emergency buffer for precisely this type of loss. Binance shared the update that affected assets are covered in a post on X.
New Proof of Reserves Snapshot Covers 198 Crypto Assets
Binance published its new Proof of Reserves snapshot at 00:00 UTC on November 12. The new snapshot expands on the 44 assets included in the previous snapshot on November 4 to 198 tokens — a wider scope that matters for verification, since holders can only check backing for assets included in the snapshot. However, the company noted that the snapshot is not a complete verification process, but rather a publication of reserve data.
Zero-Knowledge Proof Still Needs to Be Generated
Given the complexity of creating the complete zero-knowledge proof, Binance estimates the task will take between 40 and 50 hours to complete. Once finalized, all affected asset holders will be able to determine whether they had a share in the reserve calculation and confirm the appropriate level of backing, at 1:1 or above.
The integration of zk-SNARKs and Merkle trees in Binance's Proof of Reserves system enables users to verify their account balances without publicly revealing the specific amounts of assets held by individual users.
Proof of Reserves Adds Transparency, but Its Scope Has Limits
The reserve update provides another snapshot of how Binance's reserves look on-chain for users in the aftermath of the hack, but Proof of Reserves is still not a full valuation of Binance's finances. As Binance itself points out, PoR can evidence customer balances and corresponding reserves on a specific date, but it is unable to independently prove solvency or provide information on all of the company's off-chain obligations.
The U.S. Public Company Accounting Oversight Board has also warned that Proof of Reserves engagements are not the same as financial statement audits, and that they might not cover liabilities, borrowed assets, or customer legal rights.
The next major event for Binance users is the launch of the full zero-knowledge proof, which will make the November 12 reserve snapshot verifiable by each individual user.
Source: Crypto Ninjas
