Mike Novogratz calls out Binance for mishandling hack

Getting your Trinity Audio player ready...

Binance CEO Changpeng Zhao (CZ) might be treating the recent hack of his exchange like it’s a minor inconvenience, but others are much more alarmed. Mike Novogratz, the influential crypto investor, believes that this could bring a whole new wave of scrutiny and regulations to the crypto world, and he’s not a fan of how the CEO has handled this mess.

The 7,074 Bitcoin Core (BTC) hack lost Binance roughly 2% of its BTC holdings, and made for a $40 million loss. As a reaction to it, the exchange announced some “unplanned maintenance,” and CZ suggested a rollback on the BTC blockchain. They also publically considered giving customers a haircut to spread the losses evenly.

The CEO of Nugget’s News, an Australian crypto outlet, minimized the hack to some extent in suggesting that 2% BTC lost wasn’t a big deal. Novogratz wasn’t having that, showing some alarm that Binance was getting a pass for their lack of security.

2 percent is a lot when your the worlds largest crypto exchange. No way to spin this as good. Will certainly bring more scrutiny from regulators. https://t.co/uqFH3tStCp

— Mike Novogratz (@novogratz) May 7, 2019

The suggestion of rolling back the blockchain really got Novogratz irked though. CZ’s suggestion that the entire world of BTC should roll back, to save his company a few million, is unthinkable for any BTC fan that wants to consider the crypto a legitimate “store of wealth.”

I am shocked that @cz_binance even went there. Talk of forking or reorganizing the blockchain is close to heresy. When the ethereum community did it the project was like 5 months old. A baby. Bitcoin now has $100bn market cap and is a legitimate store of wealth. https://t.co/pXSqiUcq0i

— Mike Novogratz (@novogratz) May 8, 2019

That tweet got CZ’s attention, who responded and claimed that Novogratz was twisting the story. All the same, in his correction of Novogratz’ story, CZ actually retweeted his own thread walking back his previous idea to do exactly what Novogratz was worried about. It’s not that the influential investor got the story wrong, it’s that CZ is changing his tune when he realized he didn’t have the backing of the industry.

The exchange ended with Novogratz thanking CZ and Binance for their transparency, but the initial commentary still stands. Binance controls an incredible amount of wealth in the crypto world, and they’ve now proven themselves vulnerable to hack’s just like the least secure of exchanges.

Like with the outcome of so many hacked exchanges, when exchanges prove that their customers’ money could be open for thieves to pick at, regulators are going to take a harder look at the operation.