Binance Lacks Cyber Insurance for $6.3 Billion Hack, Bloomberg Law Reports

Binance had been unable to obtain cyber insurance ahead of the roughly $6.3 billion October hack, Bloomberg Law reported Nov. 3, citing a person familiar with the company's internal business.

The exchange does carry directors and officers insurance for executives targeted by regulatory probes or litigation following the attack, the report said.

Binance has committed to absorbing the financial loss itself. In its Oct. 30 recovery update, the exchange said it had set aside more than $6.34 billion in company funds to cover stolen assets after its hot wallets were compromised on Oct. 29.

The same update said approximately $3 billion in stolen assets had been frozen onchain through work with law enforcement and industry partners. Binance listed recovering those funds as a separate task from replacing customer assets; frozen funds are not the same as money returned to the exchange.

Company Reserves Fund the Reimbursement

Binance's Oct. 31 funding breakdown listed three sources: a partial deployment of its Secure Asset Fund for Users (SAFU), a portion of its futures insurance fund and its corporate treasury.

“Binance will absorb the financial impact of these stolen funds, not our users,” the exchange said.

SAFU is Binance's emergency user-protection reserve. The exchange confirmed a transfer from the fund on Oct. 31, as The Defiant previously reported, and pledged to replenish it to approximately $1 billion.

Despite its name, the futures insurance fund is also an internal reserve, not a third-party cyber-insurance policy. Binance said it is funded by the company, including fees collected during liquidations, and is not part of user assets. The exchange said it reallocated only the excess above its required risk-management coverage level.

In its Nov. 2 update, Binance said it had replaced approximately 95% of the impacted amount. The remaining 5% consisted of less-liquid tokens that take longer to source in the required quantities.

Binance also said it had completed the zero-knowledge proof for its latest reserve snapshot, allowing users of ten covered tokens to verify their backing. It plans another snapshot covering more tokens on Nov. 4, followed by an estimated 40 to 50 hours to generate the updated proof.