Binance Pledges Full Reimbursement for $6.34 Billion Hack, Putting Finances in Focus

Annual revenue estimated at as much as $17 billion

Holds more than $1 billion of SpaceX stock

No public financial statements make verification difficult

Binance, the world’s largest cryptocurrency exchange, has drawn attention for its ability to raise funds after saying it would fully reimburse users for a hack amounting to about $6.34 billion. The company also signaled confidence in its finances, saying it holds more than $1 billion of SpaceX stock. Still, Binance does not disclose financial statements, making it difficult to verify its actual funding capacity or its financial health after paying compensation.

According to the cryptocurrency industry on Nov. 2, Binance said on Oct. 30 that it had secured more than $6.34 billion to compensate users for the hack. That represents 95% of the stolen digital assets. Binance said it had fully replenished reserves for 10 major cryptocurrencies, including Bitcoin, Ether and Tether, and was also buying the remaining less-liquid tokens.

The exchange first used its $1 billion Secure Asset Fund for Users, or SAFU, and part of its futures insurance fund, which amounts to $1.85 billion, for reimbursements. Binance also deployed its own corporate funds. It is difficult, however, to determine how much of the compensation came from the company’s own money. Binance is privately held and does not disclose consolidated financial statements for the group. Its net income, equity capital and cash-equivalent assets remain opaque.

Its earnings power can be estimated indirectly through disclosed trading data and outside analysis. Binance’s total trading volume last year reached $34 trillion. Forbes estimated the company’s annual revenue at $16 billion to $17 billion.

Applying the 17.6% net margin posted last year by Coinbase, Binance’s listed rival, implies annual net income of $2.8 billion to $3 billion. That estimate may be overstated, though, given founder Changpeng Zhao’s rebuttal that annual revenue is closer to $5 billion.

Binance has also said it holds more than $1 billion of SpaceX stock. Co-founder He Yi said annual revenue alone would be enough to absorb the hack losses and that there was no need to sell the SpaceX stake. Binance also paid a total of $4.3 billion in fines and forfeitures to U.S. authorities in 2023 over anti-money-laundering violations and related issues.

After withdrawals resumed on Nov. 1 following the hack, Binance saw net outflows of about $3.6 billion in roughly nine hours. That was equal to 2.1% of the exchange’s total assets of $171 billion. Bloomberg assessed the outflows as a relatively limited shock compared with Binance’s overall business size. Binance is scheduled to release verification data on Nov. 3 showing whether it holds sufficient reserves to match customer crypto deposits.

Cho Mi-hyun, Korea Economic Daily reporter mwise@hankyung.com