Important notes
In order for the blockchain ecosystem to develop, its integrity must be preserved. By maintaining the integrity of the ecosystem, industry stakeholders can ensure user trust and thus foster growth.
In line with this vision, Binance has developed a user-centric culture that defines everything it does. We put this into practice by helping users recover lost digital funds whenever possible and by blocking and seizing illegally acquired funds that reach our platform.
Defending against bad actors requires coordination of many parties across the ecosystem. In this regard, Binance's Security team has blocked and/or seized an estimated $55 million in user funds throughout 2023.
The rise of digital assets has led to an unprecedented shift in the way people organize their financial activities. Especially in such paradigm shifts involving new technologies, trust becomes a key resource in ensuring progress and adoption. In such critical times, emerging ecosystems and sectors are vulnerable to malicious actors seeking to exploit their development. Early in the history of digital finance, we witnessed some cases of malicious crypto fraud, leading to misperceptions that cryptocurrencies were mostly used for crime.
To support the growth of the ecosystem, which is still in its early stages, industry leaders like Binance must use their reach and resources to support other participants in this emerging market, protecting users and the integrity of the space. From the very beginning, Binance has been committed to taking on this responsibility, which is an important part of our vision of always putting users first. It is always our duty to put the community first and protect the integrity of the ecosystem.
Developing a Living Ecosystem
Ecosystem integrity ensures that users are protected when interacting with the world of digital assets. Maintaining the integrity of an ecosystem means protecting the members of that ecosystem and thus supporting its growth. With the right tools and techniques, a leader like Binance can play a key role in this process by protecting users from malicious attacks on the ecosystem and mitigating the effects if such events occur.
While Binance hosts its own range of platforms, products, and services, it is only a small part of the broader global digital asset community. Many entities, from the protocols that make up the infrastructure layer to the users, developers and intermediaries in this layer, together form the global blockchain ecosystem.
In our early days, we faced criticism for trying to secure the integrity of the ecosystem by protecting users and recovering their funds. Critics often advocated for a more âsupervisoryâ approach compatible with blockchainâs decentralized nature and code-centric foundation. In a decentralized and permissionless network, codes manage the flow of funds and information, not any central entity. When a centralized exchange like Binance takes responsibility for recovering lost funds or attempting to address the negative effects of security breaches, its actions are sometimes seen as going against the grain of the underlying code. But when the code fails, leaders in the field must take action to secure it.
Despite the criticism, we maintained our user-centric approach and were one of the first exchanges to take action against scams, hacks and rug-pulling incidents, and to conduct proactive recovery efforts following such incidents. We are also one of the first industry stakeholders to actively collaborate with law enforcement agencies globally to combat crypto-related crimes. The trust and support the community has given us, both on and off our platform, has always contributed to our success. We continue this harmonious growth cycle by continuing to develop the ecosystem.
Helping Individuals
Finding your way in the cryptocurrency world can sometimes be daunting, especially when you're starting out. Sometimes transactions may not go as planned or coins may be lost. The potential to preserve the integrity of the ecosystem lies in securing and saving the assets of individual users. As many in the industry know, blockchain's immutability can make it difficult to recover funds. Tokens sent to the wrong address are often lost after the transaction is completed.
However, Binance's Customer Service (CS) team offers many different coin recovery services for a variety of possible mishaps. These cover a variety of scenarios, from unaccounted tokens due to network issues, blockchain upgrades or wallet maintenance, to incorrect deposits into wallets, unlisted tokens or unsupported networks. They also address recovery issues related to delisted tokens, deleted accounts, restrictions under laws and regulations, misdeposited coins, and even lost NFTs.
Errors may occur, but our Customer Service representatives will correct errors, making the process safer and more user-friendly. Our team successfully handled 381,616 applications in 2022 and 2023, recovering approximately $4.35 billion worth of crypto that was deposited but not accounted for various reasons and returned it to our users. Their efforts create a safe trading environment even for novice crypto users, thus contributing to the integrity and robustness of the entire ecosystem.
Users are the foundation of the ecosystem and user trust is the most important resource that fuels our innovative world. Fortunately, Binance's Customer Service team is ready to create a friendly and safe environment for them.
Collective Defense
Contrary to some popular misconceptions, only a small fraction of cryptocurrencies are used in criminal transactions. According to Chainalysis' 2024 crime report, illegal crypto transactions in 2023 will be just 0.34% of total on-chain transaction volume, down from 0.42% in 2022 has created its reputation. Yet when crypto crimes occur, the global blockchain ecosystem steps up to combat them.
Binance's Security team collaborates with various partners, including other exchanges, services, blockchain analysis companies, user communities. Particularly in the case of well-established criminal organizations, intense efforts are made to block as much of the stolen funds as possible. These are collective defense initiatives that play a crucial role in keeping the ecosystem safe. Contributing to these efforts, the Binance Security team has helped block and/or recover over 55 million USD of user funds throughout 2023.
Block scammers
Rug pulling is a type of fraud in which developers attract investors to their seemingly very attractive project, then suddenly abandon the project and sell or withdraw all liquidity from the project. Rug pulling applications are often seen in decentralized finance (DeFi) projects and decentralized exchanges (DEXs). While the decentralization and openness of these areas allows innovation within the community, it can also make it difficult to audit and secure these areas.
On October 13, 2020, a DeFi project called WineSwap experienced a rug pulling incident less than an hour after launch. Its founders disappeared with an estimated $345,000 worth of user funds. Binance Security team tracked the flow of funds to exchanges through various blockchains and eventually the funds were blocked. The next day, our team identified the suspect as a Binance user, who quickly agreed to cooperate to return the funds to the victims. Ultimately, with the help of many parties in the ecosystem, we were able to return 99.9% of the stolen funds to their rightful owners.
Another significant rug-pulling incident occurred on March 4, 2021, when the DeFi project Meerkat Finance disappeared a day after its launch. Fraudsters withdrew approximately $31.5 million in tokens from investors' accounts. After being contacted by the BNB Chain community, Binance tracked the stolen assets through multiple addresses. The community reported the incident, and the Binance Security team investigated the scammer's activities and successfully identified a suspect. By the end of the day, more than 95% of the stolen funds were recovered, making Binance's largest fund recovery operation at the time.
More recently, in May 2023, a project called XIRTAM launched a rug-pulling operation, stealing an estimated $3.3 million in ETH from investors before depositing the funds into a Binance account. Our security team immediately blocked the funds, preventing fraudsters from accessing them. Our team then analyzed the project's activities to identify victims, calculate losses, and refund more than 1,750 addresses. We have successfully returned an estimated $2.3 million to victims by September 2023, and the process is still ongoing.
Fighting hackers
Hackers exploit vulnerabilities in blockchains or related platforms such as wallets and exchanges to illegally access funds and data. In such cases, Binance and other industry partners must act quickly to ensure that attackers do not get away with their crimes. This is a defense coordinated across the entire ecosystem.
In June 2022, Harmony's Horizon bridge was hacked and attackers stole an estimated $100 million in cryptocurrency. This attack was attributed to Lazarus, a North Korean cybercrime group. Following this, the Binance Security team helped track and block over 8.5 million USD of stolen funds.
Another attack attributed to Lazarus occurred a year later, in June 2023, when Atomic Wallet, a non-custodial platform, was surprisingly hacked. An estimated 5,500 users' wallets were compromised and over $100 million in funds were stolen. Binance's Security team helped track and block these funds once they reached Binance accounts and other exchanges we alerted. In total, we managed to block approximately $1.3 million in user funds.
Ultimately, these defensive efforts demonstrate the power of a collective action where many moving parts come together to secure the whole. This harmonious complexity is the main feature of the global blockchain ecosystem, and it is our duty to serve this ecosystem.
The Future of Integrity
Binance has always been driven by its commitment to users. Since day one, users have been our first priority, and it's this commitment that has brought us to where we are now. Each of these cases highlights how we protect the integrity of the ecosystem, both independently and collectively with other stakeholders in the field. These would not be possible without our and our partners' common mission to serve the ecosystem.
As we move into the next phase of global adoption, ecosystem integrity will become an even greater priority. Binance's user-centric culture will continue to guide us as we go beyond industry standards to support the ecosystem. When integrity is assured, growth and development continue.