The majority of the cryptocurrency space seems to have accepted Binance’s explanation for what happened in its recent $40 million loss to hackers. Chico Crypto doesn’t accept that story quite so readily though, and continues to investigate if something fishier might be going on at the leading exchange.
In his most recent video, “Binance Hack Scandal. Truth Revaled! Funds #Safu? Theory You Haven’t Heard…”, Tyler Swope, the host of the channel, looks hard at the official story, and the funny circumstances that leads him to doubt it.
He points again to a hack that happened in 2018, when an almost identical amount of Bitcoin Core (BTC) was stolen. During that hack, Binance shut down trading and conducted 24 hours of maintenance. With nearly the same amount of BTC stolen this time, Binance is asking for a week’s worth of maintenance, but is allowing trading to continue. This doesn’t add up, Swope argues. If hackers have access to plenty of stolen data to access accounts with, they should be shutting down trading to prevent further damage.
He believes that part of the reason Binance kept trading available was to keep the value of Binance Coin (BNB) high. It wasn’t a factor during the 2018 hack, but he believes the price would crash if trading was suddenly shut down now.
Segwit also plays a role, Swope thinks. Analysis of the hack shows the hackers withdrew the 7000 BTC to a Segwit address. As far as we know, Binance is still incompatible with Segwit wallets. Chico Crypto points to an answer in the CZ Binance ask me anything that Binance might have been attempting to test Segwit withdrawals and nearly lost the BTC. He says:
“So there’s a possibility that this was a major fuckup, and plain out incompetence by their employees. They were testing out Segwit integration and almost got the funds lost forever. They sent the Bitcoin from Binance’s hot wallet to Segwit addresses that aren’t necessarily compatible.”
He added that once the hackers withdrew the money, the funds didn’t move for hours from the hackers’ wallet. He thinks when the funds finally did move, it may be because Binance finally found a developer who could fix the situation.
This explanation for the hack doesn’t seem crazy at all, and if it turns out to be true, then there never really was a hack. Binance simply mishandled its own BTC, but called it a hack to cover up what really happened. Why would they do that though? Swope thinks this could be a marketing stunt to encourage users to use the new Binance decentralized exchange.
He also theorizes that with users unable to withdraw their BTC because of the hack, Binance might be trying to lock down that value in preparation for whatever might happen with the Tether scandal.
His favorite conclusion is still that this was simply incompetence though, with any marketing benefit being a happy side-effect for Binance. If that is the case, it’s worrying enough that the biggest exchange in the world came close to whipping out $40 million worth of value because of a simple mistake.
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