An error occurred yesterday on Binance, one of the largest cryptocurrency exchanges in the world. The error caused a massive sale of the altcoins belonging to a group of Binance users in order to later buy a cryptocurrency called Viacoin without being authorized by the users.
In relation to this event, the Binance team published an official statement saying the platform was not compromised and clearing the rumors about a possible hacker attack on the cryptocurrency exchange. Likewise, the Binance team confirmed that the affected persons had previously registered their private keys on external platforms outside Binance, such as trading bots. The Binance team announced a temporary suspension of all withdrawals of assets from their platform.
The Binance team said: “We are investigating reports of some users having issues with their funds. Our team is aware and investigating the issue as we speak. Please remain patient and we will provide an update as quickly as possible.”
At the same time, Changpeng Zhao, the CEO of Binance, published a tweet on his official Twitter accounts confirming that all funds were safe: “All funds are safe. There were irregularities in trading activity, automatic alarms triggered. Some accounts may have been compromised by phishing from before. We are still investigating. All funds are safe.”
This happening was the cause for a discussion in the crypto community and the users agree the error was caused by a trading bot identified as altcoinbot.io. Some of Binance’s users linked this bot with their accounts on Binance. The situation was explained by Ran Neuer, the founder of ONCHAIN capital, on his official Twitter account: “Binance Update: There was no hack! A trading bot that some were using to trade automatically maliciously traded all alts into BTC and then bought VIA. If you weren’t using the BOT you are not affected.”
It seems this was the malicious pump and dump strategy that took over the control of the funds belonging to the victims, exchanged them to bitcoin and then bought another cryptocurrency called Viacoin to raise its price. This caused the price of Viacoin to go up by almost 19% to about 2.89 US dollars and then to its historical maximum of 6.55 dollars some hours later.
The CEO of Binance later published an update on his Twitter account confirming all the irregular trades were localized and announcing they would be reversed: “We have localized the irregular trades, they will be reversed. All funds are safe, thanks to the fast alarm. Please learn to secure your accounts against phishing.”
This event had repercussions on the cryptocurrency market, being one of the reasons for the drop of the prices of 98 out of the first 100 cryptocurrencies with the highest capitalization on the market according to CoinMarketCap. Other reasons include the recent announcement about cryptocurrency regulations in Japan and the United States of America.
The pump and dump schemes are used to spark a vertiginous rise of the price of a cryptocurrency in order to massively sell it later at a price much higher than the purchase price, making the price of that cryptocurrency collapse. These schemes are usual on the cryptocurrency market. Last month, a fraudulent scheme was reported involving a cryptocurrency called E-Coin. The price of this cryptocurrency was inflated by around 4,000% in only one day and then it collapsed in a matter of hours, leaving many people with big losses.