What happens to customer funds on exchanges

A record-breaking hack at Binance, the world’s largest cryptocurrency exchange, is a reminder of the risks investors take when trusting a company to hold their digital tokens.

Binance said Friday that the security breach affected about $6.3 billion in client assets, making it the largest crypto hack on record. Around $3 billion of the affected assets has been frozen on blockchain networks, and the exchange says it has begun recovering some of them.

Binance’s initial investigation suggests hackers gained access to the firm’s withdrawal systems and were able to make unauthorized transfers from the exchange’s crypto wallets, according to the company. The company says it has found no evidence that the private keys controlling those wallets were leaked and is still investigating the full scope of the breach.

The company says it will cover customers’ losses. Binance maintains a roughly $1 billion emergency fund known as SAFU, which was created to protect customers in the event of a security breach. The company initially said SAFU and company funds would cover the losses, and has since said it has set aside more than $6.3 billion of its own funds.

For crypto investors, the Binance breach highlights one of the risks of keeping assets on an exchange. While exchanges make it easier to buy, sell and store crypto, what happens after a hack can vary widely, including whether customers get their money back. 

What happens to your crypto when an exchange gets hacked

Crypto exchange hacks aren’t uncommon. Hackers stole roughly $1.5 billion from Dubai-based exchange Bybit in 2025, while Seychelles-registered Bitget lost more than $387 million in a hack in September 2026.

But a hack doesn’t necessarily mean customers will lose their money permanently. Stolen assets can sometimes be recovered or frozen — preventing the hackers from moving or cashing them out — and exchanges may also have insurance, dedicated emergency funds or other company resources available to cover losses.

In Binance’s case, roughly half of the affected assets have already been frozen, preventing some of the stolen crypto from being moved. Its roughly $1 billion SAFU emergency reserve provides another backstop, if needed.

Customers don’t always recover stolen digital assets quickly. New Zealand exchange Cryptopia was forced into liquidation months after a 2019 hack in which about NZ$30 million in crypto was stolen. The liquidation process stretched on for years, with the first distributions finally beginning in 2024. 

“When you leave crypto on an exchange, you are relying on that company’s controls and its balance sheet,” says Martin Mulyadi, YHB Endowed Chair in Accounting and professor of accounting at Shenandoah University. “A pledge to make customers whole is only as strong as the resources behind it.”

What you should look for when choosing a crypto exchange

When considering where to transact in and hold crypto, start by researching the exchange itself. The Securities and Exchange…