Binance hack: Investigators in a 'cat and mouse game' to recover $6.3 billion in stolen funds - CNBC
Crypto firms and law enforcement are racing to recover more than $6 billion worth of cryptocurrency stolen from Binance before hackers manage to hide the funds.
Crypto firms and law enforcement are racing to recover more than $6 billion worth of cryptocurrency stolen from Binance before hackers manage to hide the funds. The firms say they're in a 'cat and mouse game' against alleged North Korean hackers who are using a combination of crypto obfuscation techniques and professional global money laundering networks to turn their digital coins into fiat currency.
Frozen stablecoins
After the hack, several stablecoin issuers, including Circle, which issues USDC, and Tether, which issues USDT, moved to freeze the funds. Stablecoins are digital coins that represent a currency, such as the dollar, 1-to-1 and are backed by assets such as government bonds or fiat.
Binance estimates that around $3 billion worth of cryptocurrency has been frozen so far. The issuers of the stablecoins could burn and reissue the tokens and potentially recover those losses. In this scenario, a company like Circle or Tether would effectively destroy the frozen stablecoins, making them inaccessible to hackers.
The hackers were one step ahead. They quickly moved to sell USDT to market makers and borrow the cryptocurrency ether against the stablecoin, according to TRM Labs. Ether is harder to freeze, and the entity the hackers borrowed from would be left with the stolen stablecoin.
The attackers knew that route would be closed to them and so got out ahead of that.
Obfuscating stolen funds
Hackers have used sophisticated tactics to evade law enforcement and keep authorities from seizing the roughly $3 billion that remains. Cryptocurrencies run on blockchains, which are public ledgers of transactions. That means crypto forensic firms can track the movement of crypto across different online wallets.
Instead of using crypto mixer services, Chainalysis observed 'laundering patterns we have not seen before,' with hackers using automation to send funds back and forth between different wallets to throw investigators off their scent.
Rather than simply moving funds onward, they repeatedly circulate them among addresses, often sending funds back to addresses involved earlier in the sequence. If hackers swap stablecoins into cryptocurrencies like bitcoin and ethereum, it's not possible to freeze the assets.
Jonathan Levin told CNBC that the hackers moved a lot of money to different Tron addresses. 'We've got teams working around the clock to continue to follow that,' Levin said. 'We also have automated mechanisms now to track that. It's not just manual work.'
It's this continued cat and mouse game where bad actors are trying to obfuscate their transactions and we are trying to track and trace them.
Global money laundering networks
Hackers are increasingly using Chinese money laundering organizations to turn crypto into fiat, according to Chainalysis' Levin and TRM Labs' Redbord. 'So we are not necessarily only chasing North Korean on-chain, often we're chasing these professional money laundering networks,' Levin said.
On-chain refers to transactions on blockchains, while off-chain refers to transactions not recorded there. Money laundering organizations will offer to buy the stolen crypto over the counter for a large fee. They would then launder the money and get it back to the hackers, potentially in some form of stablecoin, which can then be exchanged for fiat currency.
When it gets to this stage, it becomes harder to recover stolen funds. 'As you get further and further away, the amount of seizure opportunities go down,' Levin said. Binance pledged to cover losses using its Secure Asset Fund for Users.
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