> saying it will cover all losses from the hack and is working with law enforcement officials to identify who is responsible.
Isn't Binance the one that needs to be prosecuted for negligent security? How does "a compromised laptop" lead to a $6bn wipe in a matter of minutes?
This is why banks are regulated, though I have no idea if/whether these platforms are regulated in any similar way.
The customers surely have standing to sue Binance. But to close the gap between what you feel should happen and what could actually happen… exactly what crime could they be prosecuted for?
What would they sue for? Nobody lost any funds.
Why should we believe Binance when they say all customers will be made whole, and how will they do that, with what money?
It seems very unlikely they have $3-6B lying around ready to repay customer deposits. At the very least this would be catastrophic for them if they do lose all that money.
Have they re-enabled withdrawals yet? If I were a customer I'd be taking everything out as soon as possible.
> It seems very unlikely they have $3-6B lying around ready to repay customer deposits
For Binance? I’d actually say very likely. They’d need to move a couple of papers around, but should be easy.
their stated plan, for what it’s worth, is that they have $6.34B of company funds set aside, most of it already in the same coins that were taken, plus the SAFU emergency fund at about $1B. around $3B of the stolen money is frozen at Tether, Circle and others, and CZ’s own post on X put the rest of the gap at about $2B.
withdrawals have been paused since Thursday night. binance says it will reopen them in stages from Sunday and publish proof of reserves by Monday, which is the thing that would actually answer your question.
Vouched. Not sure why this was flagged.
They have much more than 6b lying around. They are a money printer .
It is estimated that Binance has revenues of 20 billion and 7-8 billion in profit a year.
Funds have been already allocated for recovery by the CEO Richard Teng.
They don't need need money. What was stolen was some sort of "digital assets". How are they going to cover that, I have no idea, but let's not equate crypto assets with money. If someone would have stolen my bike, i wouldn't be saying "they stole $1000". They stole a bike, which could or could not be recovered, and which was or wasn't covered by insurance.
Criminal Negligence. They have a history of that.
Binance and its former CEO, Changpeng Zhao, were previously sued for willfully evading anti-money laundering (AML) controls. In that instance, the government ruled their compliance failures were not an accident, but a deliberate criminal enterprise. Binance paid $4.3 billion in fines and forfeitures to settle with the DOJ, CFTC, and FinCEN in November 2023.
It looks to me like Binance will be able to scrape together enough money to make their customers whole, so your probably right.
Next time this happens to Binance though they won't have an emergency fund and possibly they'll be in debt, and that's when the users will be very screwed.
Their terrible security certainly indicates to me that future of Binance is not going to be a pretty one unless they make some enormous changes.
I’m sure they could go get some insurance, it’s cost would be a good motivation
Insurance has limits especially in cyber. Eg it could be topped out at $200M.
> exactly what crime could they be prosecuted for?
Note that “crime” has a specific definition in law. You don’t have to be a criminal (commit a crime) to be rightfully sued, civil suits are a thing.
Anyway, your parent comment already answered the question, they would be sued by negligence.
In the U.S., a lawsuit can be either civil or criminal.
Only the government (e.g., federal, state, local) may bring a criminal suit.[1] But in both civil / criminal cases they are still a suit under the law seeking some form of ordered relief from the Court.
Essentially, you can think of "criminal" as a category of law and relief (e.g., prison) that is only accessible to the government.
Both the government and citizens may bring "civil" suits. Very generally, the remedies in civil suits are a court order to 1) stop doing a thing; 2) to do a thing required by law / agreement; 3) to transfer property, usually but not always money, from one party to another; or 4) to define a set of rules governing the parties going forward.
[1] There may be some obscure exception to this, but it is true for everything I've ever seen / heard of.
What negligence? They got their own money stolen. You do not get sued for being robbed of your money, normally. If they do not have the liquidity to let people withdraw money that is another issue, but it does not seem to be the case.
I think it’s the mixed terminology that’s causing confusion. Prosecution is for criminal offenses. Lawsuits are for civil cases.
The distinction between civil vs. criminal was the core of my comment. Sure they can be sued. But what exactly would they be prosecuted for?
> This is why banks are regulated
I can't imagine thinking that banks won't lose your money. You live in a complete fantasy world.
In the United States, individual bank accounts are insured by the government to $250k per account. The overall risk profile is extremely low, regardless of whether a bank collapses or is subject to a security breach. The general assumption is that it would require the US government to collapse for your checking account to vanish, in which case you'd probably have larger problems to worry about.
If you live in Argentina, I sympathize and I take your point.
>In the United States, individual bank accounts are insured by the government to $250k per account.
>The general assumption is that it would require the US government to collapse for your checking account to vanish, in which case you'd probably have larger problems to worry about.
See USSR-Russia transition in 1990-1992 for example.
Accounts didn't vanish, but all people's money where used to cover the deficit
Alas, (effectively) government deposit insurance encourages a lot of risk taking by banks. Which then begets more regulation.
People who essentially want government guarantees for their money should just buy government bonds.
> encourages a lot of risk taking by banks. Which then begets more regulation.
Not with simple account deposits, no
Basel rules are still a thing
Hence my "Which then begets more regulation."
Customers stop monitoring their bank, when deposits are insured.
To be fair, it's not even playing ground, security-wise. There is no mechanisim by which a bank can be compromised this quickly and completely, much more of the transfer process is permissioned.
Crypto 'banks' need orders of magnitude more security and it's not a trivial problem.
> This is why banks are regulated, [...]
No, it's not. At least not historically.
Help us out. Is this not exactly why banks have to deposit X amount outside their doors?
> Is this not exactly why banks have to deposit X amount outside their doors?
Sorry, what do you mean?
Basically, the historical origins of different bank regulations are quite complicated and also differ from place to place, and they were often put in place by (political) coalitions of people who already had not one single motivation but a whole spectrum of them.
And then in addition to historical reasons, you also need to ask why things are still in place. Inertia is one answer, but it's not the only one.
I think the person is most likely talking about minimum capital requirements (which are not a “deposit outside of their doors”) and doesn’t quite understand the system.
To understand the regulatory framework for banks, the best place to start is the BIS and Basel III. https://www.bis.org/committees/bcbs/standards Generally speaking, international banks follow Basel III in addition to their domestic regulators’ capital requirements (which are probably also derived from Basel III, but have differences just to make things tedious).
Not a bad place to start, yes.
However, BIS and Basel III (and the previous Basels) are just what's currently in force for most of the world. I suspect most people would be better served by more of an historical overview. But it also depends on what one is interested in.
> Is this not exactly why banks have to deposit X amount outside their doors?
Sorry, what do you mean?
-- think that's referring to bank deposit insurance schemes...
In Europe there are CoCo bonds used to meet capital requirements - various ways of providing layers of protection in case things go wrong.
US banks tend to meet AT1 requirements by issuing preferred shares.
Binance's approach seems to be based on vibes and a vague promise
Where did you get this idea?
Oh right, now they want government to get involved with their make believe 'currency'...
Not just regulated. This is why banks are banks. This is why everything is slow!
When everything goes wrong the only defense is to be slow enough to fix it.
This idea that there are shortcuts that you can be decentralised and fast at any size is wrong.
I would assume binance is more like a bad bank but without the internal friction to make stuff like this hard.
CEO still in jail or has Donny given him leniency?
Generally it's the people who have intent to break the law who are prosecuted, not their victims.
Criminal negligence is a thing.
talking about that thing. does it only apply to some business/org. ? when a big bank launders money for years they get fines and continue to business like nothing happened, this happens every few years.
Criminal negligence usually involves bodily harm or serious risk of bodily harm.
It also requires a significant degree of willfull negligence. So in this case the criminal would be anyone who had deposited funds in Binance.
A thing that doesn’t apply to information security
Absolutely. That's why I stopped validating passwords and emails. Nobody votes with their wallets anyway, so I don't have to worry about losing customers, and regulations only go after the evil hacker testing whether 1234 might work as a password, not me for choosing not to check its hash against my database. Law-abiding citizens would never try to impersonate one another, so I'm sure fraud on my platform is low.
Some think it was North Korea ;)
This is absolutely false. But I understand why someone would believe that in this joke of an industry where all the liability often falls on the user.
> This is why banks are regulated
Yes. Move fast and break things and forget governance... Cryptocurrency has always been dumb. You either con people out of their money or you lose yours.
I had someone approach me in 2017 or so because he wanted to do a rugpull coin operation. I said I was busy and didn't help, but I'd probably be much richer (and a piece of shit human) if I got involved.
Keep in mind banks are NOW regulated but the regulations came After the bad event not before.
Regulations probably help but they basically serve to keep evolutionary memory in place in a corporate ecosystem where companies can spawn from nothing.
Bad banks no longer exist but regulations, after an extinction event, perhaps try to make that evolutionary event permanent.
At least that is my mental model.
Regulations are very lagging. And they should be understood to create moats and friction. There is no free lunch. Regulations purposefully shrink or destroy markets. That is how markets work.
Something I wish tech folks would absorb more.
If it's not frustrating and stupid, (to you at the time) it's probably not really a regulation.
> Bad banks no longer exist
This is a funny take on things, and untrue. But traditional finance is way safer and better controlled than the crypto frontier. Someone like coffeezilla has to rely on patreon and ad revenue to do the sort of journalism that exposes how debased cryptocurrency finance is. There should be much more money in exposing the fraud, but our premier capitalists are complicit in the fraud. They are fraudsters at heart, which is why they have the money and influence they do.
> Regulations purposefully shrink or destroy markets.
Sometimes maybe, but that's a matter of corruption. Regulatory capture has been used to create regulation that protects monopolies, duopolies, and the broader oligarchy for a very long time. When politicians were representatives of their voters, things worked better. Post-citizens united, the incentives are broken and we have a congress full of duplicitous, self-interested idiots.