UK Court Orders Binance Exchange to Track Hacker’s Wallets in 2.6M Exploit

Binance was ordered to identify the individuals behind a hack, raising hopes that stolen crypto assets could be tracked, traced, and recovered.

By
Chung Yee
on
August 15, 2021
Category:
BSC News

Fetch.ai Hack

The High Court of England and Wales ordered Binance to disclose the identity of individuals involved in a hack through a Norwich Pharmacal Order. Fetch.ai suffered an exploit on its Binance based accounts in June when unknown persons gained access. 

These individuals then traded at massive undervalues in a short period, resulting in losses amounting to $2.6 million.  The court order looks to have Binance find out who the culprits are. Fetch.ai engaged the firm Rahman Ravelli to represent them in this application. 

"We need to dispel the myth that crypto assets are anonymous. The reality is that with the right rules and applications, they can be tracked, traced, and recovered," Syedur Rahman––a partner of Rahman Ravelli and a member of the legal team––told Reuters.

A Norwich Pharmacal order is an order to disclose documents or information against an innocent third party mixed up in the wrongdoing. This procedure exists so that an applicant can bring legal proceedings against any unknown individuals that committed a wrong. 

Source: Fetch.ai sought interim preservation order and disclosure order from the courts.

The injunction is an interim order pending a final determination by the court. The specific reliefs sought are an injunctive relief, a freezing order, and a disclosure order. The claimant has also requested a freezing order to prevent traceable proceeds from the sale of assets from being dissipated.

Fetch.ai is an entity incorporated in England and Singapore that provides artificial intelligence for blockchains. The application by Fetch.ai, named Binance Holdings Limited (incorporated in Cayman) and Binance Markets Limited (incorporated in the United Kingdom) as the fourth and fifth respondents, respectively.

Source: Fetch.ai recently tweeted that they are now working with Binance to identify the hacker

Track, Trace, and Recover 

Binance Holdings Limited and Binance Markets Limited, although named as respondents, their roles are merely to identify the fraudulent individuals, to trace the assets or proceeds from the breach and to freeze these assets. The injunction is to preserve the subject matter of the suit and prevent further losses.

This order exemplifies how regulators, enforcement agencies, or aggrieved parties can have an immediate recourse through regulated and centralized crypto exchanges. The claim is that crypto exchanges such as Binance can operate like traditional financial institutions. 

If properly implemented, Know-Your-Customers (KYC) procedures can link the correct identity of the individual operating the account. 

Source: KYC protocols are part of the compliance 

Compliance 

Binance is facing increasing regulatory scrutiny. The Financial Conduct Authority (FCA) issued a consumer warning against Binance Markets Limited on June 26. Several banks in the United Kingdom halted deposits to Binance after the FCA’s announcement. Regulators around the world are also echoing a similar sentiment citing investors’ protection and market integrity. 

Changpeng Zhao, CEO of Binance, gave positive assurance that Binance will be actively pursuing compliance. 

Regulators and enforcement agencies can improve on financial surveillance through regulated platforms. The same set of compliance protocols imposed on traditional financial institutions can be equally applied to crypto exchanges such as Binance, with some minor modifications. 

Anonymity is a Concern  

Compliant crypto exchanges often require Personally Identifiable Information (PII) as part of its onboarding process. An account can be abused for clandestine activities if there is no link to the human actor that operates the account.

In the past, anonymity and privacy have always been identified with crypto assets. However, as adoption increases, the call for transparency and accountability becomes louder. Illegal activities can be mitigated if the bad actors can be identified and prosecuted. 


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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance. His largest crypto holdings are Solana, Ethereum, and BNB Token.

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