Chris MihosThe largest theft in the history of onchain finance took about twenty minutes, and it says more about structure than about any single exchange.
A hot wallet is one whose signing keys are connected to the internet so that it can send assets quickly and automatically, which is why exchanges use hot wallets to send assets out when customers ask for them. Cold storage keeps the keys offline and usually requires several people to approve a transaction, which makes it far slower to use and far harder to steal from, while warm wallets sit somewhere in between. The question that matters for anyone with capital at stake isn’t simply whether their assets are in cold storage, though. It’s where the assets sit while they’re being traded, who is able to sign a transaction that moves them, and whether those signers can be sure that what they’re approving is what actually happens.
What happened at Binance
At 20:05 UTC on 29 October 2026, attackers began moving assets out of Binance’s wallets across ten different blockchains, and most of the money was gone within about twenty minutes. The total was roughly $6.3 billion, which makes it the largest theft on record, more than four times the size of the $1.5 billion taken from Bybit in February 2025. Blockchain analysts at TRM Labs attributed the attack to TraderTraitor, a North Korean group linked to Lazarus, and the FBI has since confirmed North Korean involvement.
According to TRM, the attackers had compromised Binance’s hot wallet signing infrastructure, and they appear to have prepared for at least 36 hours before they moved. Binance initially pointed to a single engineer’s compromised laptop and later said other issues had been found. It halted trading, stopped customers moving assets off the exchange for about three days and reopened on 1 November, and it has said that it will “absorb the financial impact of these stolen funds, not our users,” drawing on its user protection fund, its insurance fund, its own reserves and its corporate treasury.
Two details are worth pausing on. The first is that stablecoin issuers were able to freeze around $2.7 billion of the stolen funds within about an hour, with Tether freezing roughly $1.77 billion of USDT and Circle around $825 million of USDC, which shows how much power the issuer of a digital dollar has over it. The second is that customers are being made whole only because Binance has chosen to cover the loss and is large enough to do so. That’s a decision by a well-capitalised firm, not a feature of the structure, and the customers of FTX in 2022 learned what happens when the firm in the middle can’t or won’t.
Hot wallets are not a mistake, but they are a target
Exchanges keep part of their customers’ assets in hot wallets for a straightforward reason: customers want to move their assets out at any hour, and an offline wallet that needs several people to sign every transaction can’t keep up. The trade-off is that a hot wallet’s keys, or the systems that use them, are reachable from the internet, which makes them the obvious place for an attacker to aim.
Binance wasn’t the only example this year. On 24 September 2026, Bitget lost about $351.6 million from its hot and warm wallets, and its chief executive said the loss would be covered by the exchange’s user protection fund. In both cases, a customer’s exposure depended less on what they held than on how much of it happened to be sitting in the part of the exchange that was attacked, and on whether the exchange could afford to replace it.
Cold storage helps, but it isn’t the whole answer
It would be easy to conclude that keeping everything in cold storage solves the problem, and Bybit’s loss in February 2025 shows why it doesn’t. Bybit’s $1.5 billion was taken from a cold wallet that needed several signatures to move. The attackers didn’t break the wallet itself. Instead they compromised the web interface that Bybit’s signers used to review transactions, so that each signer saw what looked like a routine internal transfer while a different transaction was actually being approved. Every safeguard worked exactly as designed, and the assets left anyway.
The lesson is that what protects capital isn’t the temperature of the wallet so much as the integrity of the whole signing process. That means keeping keys with an institutional custodian rather than with the trading venue, requiring several independent signers, making sure each signer can verify the actual transaction on their own device rather than trusting a screen, and limiting what can be signed in the first place, so that assets can only ever go to destinations the owner has approved.
Off-exchange settlement: trading without leaving assets on the exchange
The structure that institutional allocators increasingly prefer separates trading from custody altogether. Under off-exchange settlement, a manager’s assets stay with an independent custodian, the exchange is shown a mirrored balance that the manager can trade against, and the gains and losses are settled between the custodian and the exchange on a regular cycle. The assets don’t sit in the exchange’s wallets, hot or cold, while the trading happens.
This model is already used for more than onchain assets. Since November 2025 Binance has accepted BlackRock’s tokenised money market fund, BUIDL, as off-exchange collateral, and since February 2026 it has accepted shares in Franklin Templeton’s tokenised money market fund on the same basis, with the shares held by Ceffu, a custodian licensed in Dubai, and their value mirrored on the exchange. The point of the design is that a failure at the exchange, whether a hack, a freeze or something worse, doesn’t automatically reach assets that were never handed over to it.
No structure removes risk entirely, and off-exchange settlement introduces its own questions about the custodian and about how quickly settlement happens. But it changes the question from “how well is this exchange protected?” to “can the exchange ever touch my assets at all?”, which is a much better question to be asking.
Questions worth asking
Before you allocate, it’s worth finding out where the assets will physically sit while they’re being traded and whether that’s with the trading venue or an independent custodian. It’s also worth asking how much of the arrangement relies on hot wallets, who holds the signing keys and how many people must approve a transaction, whether each signer can verify the real transaction on their own device, and whether assets can only be sent to addresses you’ve approved. And if something does go wrong, ask who absorbs the loss, whether that’s written down anywhere, and whether it depends on the goodwill of a company that may or may not be able to pay.
How MakeBanc is structured
On MakeBanc, your assets sit with an institutional custodian in a vault that you sign for, rather than in a trading venue’s wallets. The independent manager you choose can trade, but can never move the assets out, and MakeBanc itself never holds the keys. You can require two or three named signers before anything changes, and you can check where your assets are on a public ledger at any time without having to ask anyone.
MakeBanc doesn’t trade, hold or move your assets. Its role is to make the structure around them visible and to keep the decisions about them with you.
Frequently asked questions
What is the difference between cold storage and a hot wallet? A hot wallet keeps its signing keys connected to the internet so it can send assets quickly and automatically, which suits frequent transfers but makes it a target for attackers. Cold storage keeps keys offline and usually requires several people to approve each transaction, which is slower but much harder to compromise.
What happened in the Binance hack in October 2026? On 29 October 2026, attackers attributed to North Korea’s TraderTraitor group compromised Binance’s hot wallet signing infrastructure and moved about $6.3 billion across ten blockchains in roughly twenty minutes. Binance stopped customers moving assets off the exchange for about three days and said it would cover customer losses from its own funds.
Is cold storage enough to protect assets? Not on its own. In February 2025 Bybit lost $1.5 billion from a cold multisig wallet after attackers compromised the interface its signers used, so they approved a different transaction from the one they were shown. Protection depends on the whole signing process, including independent custody, several signers and on-device verification.
What is off-exchange settlement? Off-exchange settlement keeps a trader’s assets with an independent custodian while the exchange is shown a mirrored balance to trade against, with gains and losses settled periodically. The assets don’t sit in the exchange’s own wallets while trading happens.
Sources
- TRM Labs, North Korea steals USD 6.36 billion from Binance in the largest hack in history, October 2026
- Wikipedia, 2026 Binance hack
- Axios, Binance halts trading after biggest-ever crypto hack, 29 October 2026
- TechCrunch, Binance pauses withdrawals as hackers suspected of stealing billions, 29 October 2026
- Al Jazeera, Binance says $6.3bn stolen in biggest heist in history, 30 October 2026
- investingLive, Hackers drain $351.6 million from Bitget, September 2026
- Bleeping Computer, Lazarus hacked Bybit via breached Safe{Wallet} developer machine, 2025
- Check Point Research, The Bybit incident, 2025
- Cointelegraph, Binance accepts BlackRock’s BUIDL as off-exchange collateral, November 2025
- Franklin Templeton, Franklin Templeton and Binance advance institutional off-exchange collateral program, 2026
- Wikipedia, Bankruptcy of FTX
MakeBanc is a technology platform that connects investors with independent asset managers. MakeBanc does not provide investment advice, custody services or banking services. Exchanges named here are drawn from public reporting. No structure removes all risk, and you should understand the custody and settlement arrangements of any allocation before you make it.