Binance Pledges $10 Million to Compensate Cover Finance Hack Victims

Cryptocurrency exchange Binance has announced today that it will dole out more than $10.1 million to reimburse its customers who were affected by the recent hack of decentralized finance (DeFi) platform Cover Finance.

“In addition to the compensation plan from the COVER team, Binance will utilize the Binance SAFU Fund to recompense a total of $10,107,505 USD (distributed in 8,171,634.10 BUSD and 2,581.16 ETH) to affected and eligible users,” said the announcement.

The Cover Finance hack

Cover Finance, a peer-to-peer insurance marketplace that allows users to buy coverage in case another DeFi protocol gets hacked, ironically fell victim to an infinite minting exploit itself.

Via this security hole, the attackers managed to quickly create massive amounts of fake coins and use them to redeem Cover’s tokens, which they later dumped on exchanges.

Another DeFi project called Grap Finance later claimed responsibility for the attack, returning Cover Finance's funds and recommending that its developers “take care of your own shit”. While the Cover Finance protocol itself wasn’t affected by the exploit, the price of its COVER token plummeted by nearly 100%—from $731 to $26 at the time.

“Short version: COVER smart contract got hacked. A lot of users lost A LOT of money. Project team says they can't cover the losses. We made a simple decision, we use our funds to cover losses of our users. $10 million bucks. Stay SAFU,” Binance CEO Changpeng Zhao summarized.

Per Binance’s announcement, after reviewing the latest compensation plan from the Cover Finance team, the exchange discovered that a large number of its customers bought COVER tokens after the proposed snapshot time and would be left with worthless assets as a result.

To remedy the situation, Binance decided to use its own SAFU Fund to compensate its customers, since “the COVER team was unable to provide any funds beyond their original compensation plan.”

“As described in COVER’s compensation plan, the COVER team will take a snapshot of all COVER balances at an Ethereum block height of 11541218 [...] and distribute a new COVER token at a ratio of 1 COVER-old = 1 COVER-new. We will also incorporate the time that COVER trading was halted on Binance,” said the exchange.

However, while the exchange will use the COVER ticker for the new tokens that would be issued in response to the hack, it will “determine whether or not to open trading for COVER-new at a later date.”