Frantic Binance hackers created windfall for crypto traders

Blockchain data firm Bitquery estimates the attackers lost about US$119 million through poor execution in their haste.

SAN FRANCISCO - For most crypto investors, the theft of US$6.3 billion (S$8.06 billion) from Binance was a reminder of the risks that still surround digital assets. For a small group of fast-moving trading firms and skilled investors, it was a chance to make a quick buck.

As apparent North Korean hackers rushed to convert funds stolen from the world’s biggest crypto exchange, they accepted punishing prices.

Bitquery, a blockchain data firm, estimates the attackers lost about US$119 million through poor execution in their haste.

“The hack created sharp price volatility and a single, large, price-insensitive seller moving through thin liquidity,” said James Aitchison, chief investment officer at Caerus Global Management.

That aggressive, one-way torrent distorted crypto prices across disparate venues and blockchains, he said, adding: “We traded the event and found several attractive dislocations.”

After gaining control of Binance funds on Oct 29, the attackers focused on getting rid of the stablecoin portion of the haul, knowing issuers would soon begin freezing those stolen tokens.

Within roughly half an hour, they began aggressively swapping stablecoins such as USDT into other cryptocurrencies like Ether, which can’t be frozen, buying the tokens wherever they could and jacking up the price.

Tether and Circle froze roughly US$1.8 billion worth of their stablecoins about 40 minutes after the main Ethereum leg of the hack began, according to blockchain intelligence firm TRM Labs.

That disrupted the usual flow of money between trading venues and allowed price gaps that normally disappear in seconds to remain open far longer.

Luca Parlamento, founder and chief investment officer of D2 Finance, said his firm spent the night “on the other side of the thief’s trades”.

Parlamento said the attackers paid an average of about US$2,657 for Ether through decentralised exchanges such as Uniswap, well above the roughly US$2,300 price on Hyperliquid, a crypto derivatives platform.