Centralized Exchanges Are Hacker’s Playground

[ColdLava40]

Bitcoin being the first cryptocurrency, featured mainly on the idea of freedom and decentralisation. A System that was specially designed, so we no longer have to be under the control of the government, banks or any Central authority.. As years passed, we now have countless numbers of cryptocurrency that goes against the idea of what bitcoin was created for, but that's not the gist. We can have centralized coins, but still have control over how you choose to store them.

Over the years, many investors have shifted from being their own bank to letting centralized exchanges or systems help them control their funds. The agreement made between the exchange and their customers is to ensure the safety of their asset for as long as it stays under their control.. but for many investors, that dream has turned into a nightmare of empty balances and site under maintenance banners. As the crypto market grows, it has painted a massive bullseye on centralized exchanges..

Despite the billions spent on cybersecurity, these platforms remain the ultimate prize for global hacking syndicates.The statistics are staggering. In 2024 alone, more than $2.2 billion was siphoned away from digital platforms. This isn't a new phenomenon, it is a systemic flaw.

Since the early days of Mt. Gox, which famously collapsed after losing 7% of all Bitcoins in existence at the time, the industry has watched a recurring cycle of proposed unhackable claimed platforms falling victim to simple exploits.The harsh reality is that no exchange is 100% secure. Security is a constant arms race where the defender must be right every single time, but the attacker only needs to be right once. These hackers aren't necessarily breaking the blockchain itself, instead, they hunt for a small loophole.. a compromised employee’s laptop, a flaw in a smart contract bridge, or a momentary lapse in a hot wallet’s security protocol. To a hacker, an exchange is a honeypot, a single location storing the private keys of millions of users. If they get in, they don't just rob one person, they rob all.

Behind these headlines are real people who have lost their life savings, college funds, and years of hard earned wages. For these investors, the convenience of keeping funds on an exchange proved to be a fatal mistake. As we move further into this digital age, the rising number of thefts serves as a loud, clear warning.. if you don't control your money, someone else eventually will...

Well for those that aren't aware, here's a list of Major Exchange Hacks in History

• Mt. Gox-2014
  The collapse of Mt. Gox has remained the most infamous event in crypto history... For several years, hackers exploited a vulnerability known as transaction malleability, essentially tricking the exchange’s internal systems into believing withdrawals had failed, allowing them to withdraw the same funds repeatedly. By the time the exchange shut down in February 2014, 850,000 BTC worth roughly $460 million at the time had vanished... 200,000 BTC were later found in an old digital wallet, the recovery process has been a decade long legal battle. It wasn't until 2024 that the rehabilitation trustee finally began distributing these recovered fractions back to long suffering creditors....
• Bitfinex-2016
  In August 2016, Bitfinex suffered a massive breach when attackers bypassed the exchange's multi signature security layer to approve over 2,000 unauthorized transactions. A total of 119,756 BTC was stolen... Unlike many other hacks, this story had a surprising ending. In 2022, the U.S. Department of Justice arrested a New York couple for laundering the funds and seized over $3.6 billion worth of the stolen Bitcoin the largest financial seizure in history... 
  
• Coincheck-2018
  Japan’s Coincheck became the victim of a massive hot wallet exploit in January 2018... Hackers gained access to the exchange’s internal network through a malware infected email sent to employees, allowing them to steal 523 million NEM tokens, worth $534 million.. The funds were never recovered from the hackers. However, in a rare move of corporate responsibility, Coincheck used its own capital to reimburse all 260,000 affected users in Japanese Yen, preventing a total loss for its customers...
• KuCoin-2020
  The KuCoin hack in September 2020 saw hackers leak private keys for the exchange’s hot wallets, resulting in the theft of $281 million in various assets, including Bitcoin and Ethereum... This case became a landmark for industry cooperation.. KuCoin worked closely with other exchanges and project developers to freeze the stolen tokens before they could be laundered. Through these swift efforts and law enforcement intervention, KuCoin managed to recover approximately 84% of the stolen funds, covering the remainder through its own insurance fund.
• FTX-2022
  In the chaotic hours following FTX's bankruptcy filing in November 2022, a mysterious unauthorized withdrawal drained $477 million from the platform... Investigators later determined the attack was likely a sophisticated SIM swap exploit targeting an employee. While the bankruptcy estate has since recovered billions of dollars in other corporate assets to pay back creditors, the specific $477 million stolen during this hack remains largely unrecovered and lost in the fog of the exchange's collapse...
• DMM Bitcoin-2024
  One of the most recent and largest hacks occurred in May 2024, when the Japanese exchange DMM Bitcoin lost 4,502 BTC worth $308 million due to a compromised private key in their wallet system... The attackers used a technique called peel chains to rapidly break down and move the stolen Bitcoin through thousands of small wallets to hide their tracks... To date, none of the funds have been recovered, and the exchange eventually announced it would wind down operations and transfer its remaining customers to a competitor...
• Bybit-2025(the most recent)
  In February 2025, Bybit became the victim of the largest single digital heist in history, losing nearly $1.5 billion worth of Ethereum (ETH). The attack was a masterclass in social engineering and supply chain compromise... The attackers which were linked by the FBI to North Korea’s Lazarus Group, compromised a developer at a thirdparty wallet provider to inject malicious code into the software interface Bybit used... When Bybit executives went to sign off on a routine, legitimate looking transfer from cold storage to a hot wallet, the hidden code redirected 401,000 ETH to the hackers addresses instead... While global authorities managed to freeze roughly $40 million, the vast majority of the $1.5 billion remains unrecovered as it is laundered through complex cross chain bridges..

Why You Must Be Your Own Bank

The mantra "Not your keys, not your coins" is the most important phrase in crypto space. When you leave your assets on an exchange, you are not the owner, you are a creditor. Having heard about these major exchange hacks, some investors are still very keen on storing large amount of funds on centralized exchanges.. that shouldn't be. Even if you must store fund on such platforms, it should be a very small amount. Your large holdings should be kept in a wallet you control.. That because;

When you use a non custodial wallet, you remove the risk of being amongst the victims of exchanges going bankrupt,  or being hacked. You are no longer dependent on a CEO’s honesty or a platform’s security team.

You have true ownership of your funds and Having being in control of your keys means you have total control over your funds. No one can stop you from sending, receiving, or spending your money. You are the sole authority.
 
Being your own bank is the core philosophy of Bitcoin. It allows you to opt out of a fragile financial system where intermediaries hold all the power..The convenience of a centralized exchange is a trap for the uninformed. To protect your future, you must take responsibility for your security. Move your coins to a wallet you control today, before your exchange becomes the next headline.
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References:
https://www.investopedia.com/news/largest-cryptocurrency-hacks-so-far-year/
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https://www.paulhastings.com/insights/crypto-policy-tracker/the-bybit-hack-of-2025-potential-implications?hl=en-US#:~:text=This%20allowed%20the%20hackers%20to,to%20wallets%20under%20their%20control.

[Amphenomenon]

Being your own bank is the core philosophy of Bitcoin. It allows you to opt out of a fragile financial system where intermediaries hold all the power..The convenience of a centralized exchange is a trap for the uninformed. To protect your future, you must take responsibility for your security. Move your coins to a wallet you control today, before your exchange becomes the next headline.

The lie many continue to hold is that centralized exchanges are more convenient to use which was true at first but now things has changed a lot and is still changing. Developers even in open source wallets are putting user experience in high regard when it comes to wallet.

There are easy to use non custodian open source wallet and some are even easier to understand than that of CEX. Another thing one has to put in consideration, wallet that are:

• Use Frequently
• Use with extension and smart contracts
• Use for trading

Shouldn't have all your funds stored, cold wallet are better to avoid these but still if you use it without cautiousness of the device you connect with or where and what you click or download online, you can still put your funds at risks, the Bybit hack is a good example here. Hot wallets like Electrum, Bluewallet that are non custodian and open source are good wallet and easy to use, good security ethics are important and through this you have full responsibility if your coins.

Responsibility here gives you full access to your coins and you have to protect yourself and won't have to blame anyone if you fall into one, but don't worry those with good security ethics and are in total control of their coins are not to worry about this, than those who have their coins stored through a party and when this party lose your coin or give restrictions in getting your coins.

[Donk1]

Yeah there are actually many hacks on reputable exchanges and Bybit is an open example that even the strongest has weakness ,and when it comes to exchanges their weakness is being centralized. Even at that most folks still don't realize that anything that is too easy and convenient comes with great responsibility and at times if care isn't taken you as the user will end up paying the price That's why in the crypto world there is a common word Not your keys, not your coins....

​However perhaps most newbies whould say they are staying on exchanges because they are scared of losing their private keys or maybe making some kind of mistakes or so ,but unknowingly to them they are  actually taking even a bigger risks .for me the best advice is for them to use an exchange to buy, but always write out your seed phrase on a piece of paper and store it safely before you move your coins to your private wallet for safe keeping . That's just it. ​A word is enough for the wise at times you take advice instead of having experience that's all ....

[Botnake]

That’s the reality, but it can still improve once the systems improve as well. Even though centralized exchanges are prone to hacks, they’ll continue to grow because investors and traders still trust them more than decentralized exchanges. Money is flowing daily through these exchanges and we still need them for the adoption everyone is expecting in the future, so they’re here to stay and security will eventually get better.

For those of us who already know the risks, we know the drill, use a hardware wallet, HODL, and stay safe.

[goldkingcoiner]

Hackers can target centralized platforms more easily because of all the vulnerabilities that come with having everything in one place. But that does not mean that decentralized exchanges are safe. In fact, I would say decentralized exchanges are more likely to be traps because they are unregulated and nobody is really making any regulatory demands (which can be realistically met).

[Realwhot]

Hackers are targeting centralized exchanges more because they know that who they are targeting has that amount of money in their wallet or exchange account. People are forgetting that when they are using centralized exchanges they are not private and anonymous. A scammer cannot be able to prepare to steal 1million dollars from you if they do not have information that you have up to that amount in your wallet.
Many hackers know what their victims is worth because the victim is not anonymous that is why the hackers are very accurate many times.

[Dave1]

There's one good thread about the history of Centralized Exchanges being hacked.

Hacked Exchanges since 2011.

And I do agree, they have been a target since the beginning and even those they somewhat learned from their mistakes, still hackers are like one step of the game. Some might have been SAFU though, but still the burden is on the exchanges to protect us from this cyber threat.

On other end, if we can withdraw most of our money then good for us. But for those, you are risking it all in exchange and you should know the drill by now.

[Oshosondy]

On other end, if we can withdraw most of our money then good for us. But for those, you are risking it all in exchange and you should know the drill by now.

If I should be more truthful about this, I am using 5 exchanges actively before but it is difficult for me somehow and I changed it to three exchanges now, although I still have the two exchanges but I am not active there.

I have my trading funds divided on the 3 exchanges which I am using to trade. To send the money daily after trading to noncustodial wallets is difficult for me.

I have most of my money on noncustodial wallet but 30% are on exchanges. I will be able to afford to lose 10% if an exchange is hacked among the three.

[SilverCryptoBullet]

Well for those that aren't aware, here's a list of Major Exchange Hacks in History

There are more exchange hacks in history and many exchanges died after hacks or used hacks as their scam exit reasons.

Centralized exchanges are risky and people would feel fearful of storing fund there.
Events made you scare about custodial wallets, centralized exchanges.
Documented Timeline of Exchange Hacks.
Exchange graveyard.

Why You Must Be Your Own Bank

The mantra "Not your keys, not your coins" is the most important phrase in crypto space.

Reminder: do not keep your money in online accounts.
Bitcoin Q&A: Not your Keys, Not your Coins.

[Wincob]

Platforms like centralised exchanges are plague with possible three threats.

1. Hackers who finds bugs or backdoor in the exchange security system.
2. Betrayals from the inside, most past exchange hacks happend from the inside.
3. Those who use opportunities to carry out attacks, when a breach happened they pretend to want to help people to safeguard their money, the plan is to confuse people to give their keys and information up willingly in the name of preventing them from becoming a victim.

People must know this three threats because there is no way we can do without crypto exchanges, even if you don't store funds on them you are only limiting the chances of becoming a victim everytime you withdraw fast, you can still deposit on a exchange and the breach happens right at your face.

[BitMaxz]

Well, there's no safe on the internet; every exchange is vulnerable to online attacks. There's no perfect protection if the hackers found a loophole. All exchanges isn't immune to any attacks; even if they had the best security, hackers would still able to do some tricks to be able to get in.

I've been watching the Bybit issue many times on YouTube. The hackers, or the Lazarus Group, actually tricked Bybit staff. Someone on the staff accidentally clicks or access a site that runs JavaScript to inject into their system. Until the time comes that the exchange needs to refill, and the staff and the owner of Bybit are tricked into approving a transaction. Even if it was a multisig controlled by multiple people, they still end up being tricked and end up sending coins to a different wallet address that they don't own.

Pretty bad this is part of the war, so all exchanges are also part of these attacks. Hackers have unlimited ways to take down and hack any site; that is why. Centralized exchange isn't safe to hold most of our assets.
If we want to hold our coins for the long term always and be our bank, then always make sure all wallets are generated from an offline device, and never connect it online except for a watch-only wallet for monitoring your wallet.

I hope that someday we have an exchange that is actually made only to deal with a real person, no 3rd parties. We have some DEX, but it only works on tokens and memes.

[Mpamaegbu]

2. Betrayals from the inside, most past exchange hacks happend from the inside.

Exactly my thought too but I don't know why those lambasting Cexs for hacks don't talk about an insider job. To be honest, even Dexs also get hacked. Once an exchange; whether Cex or Dex gets compromised; it's left at the mercy of hackers. There are no two ways about that. Even cold wallets people think are hack or theft proof can also get hacked once they're compromised. In actual sense, man is the real security, not any device. Once we falter with our security, our device is exposed.

...even if you don't store funds on them you are only limiting the chances of becoming a victim everytime you withdraw fast, you can still deposit on a exchange and the breach happens right at your face.

You got that right. Hacks can happen at anytime. Those who do it don't announce it. In my early days in this industry, I had hesitated investing in a crypto business I felt was Ponzi but saw people cash out from it. The day I had a rethink and invested was the very day that site scammed.

[Moreno233]

Centralized exchanges is a place with lots of funds of users, so it is a worthy target for scammers which if they succeed will pay them. Unfortunately ,exchanges assure their customers of tight security and safety of their funds but those promises are not enough as the hackers will always look for a way to access their vault. Instead of keeping money in centralized exchanges especially when the money is not being used for anything serious in the platform. Exchanges should never be used as a wallet for saving cryptocurrency, it should be used mainly for trading, buying and selling after which the asset can be withdrawn  to a private wallet.    

[macson]

Centralized exchange platforms have complete control over their users' assets, making them the perfect place for hackers to test their security and exploit bugs or vulnerabilities for their own gain- like the perfect place with plenty of sugar for ants to congregate.

These platforms, no matter how professional they appear, become high-value targets. As sophisticated as they are, they are all designed by humans and are imperfect. Meanwhile, in the online world, hackers are constantly honing their skills and developing advanced tools to infiltrate and exploit even the smallest weaknesses. This is why even well-known exchanges have experienced system hacks.

[promise444c5]

Most of these CEXs actually use self-custody to store their funds in exchange for their users' convenience.. I don't get why most people hold their coins on exchanges, when they can just utilize a self-custody wallet.

That being said, I noticed everyone condemns CEXs and it’s good to remind us all that a single mistake with your self-custody wallet can also lead to total loss.

There are no room for error, so do it properly..

[Hatchy]

That being said, I noticed everyone condemns CEXs and it’s good to remind us all that a single mistake with your self-custody wallet can also lead to total loss.

I don't think it's being condemned, everything has its own purpose and when it comes to storing funds, centralized exchanges are not designed for that. Yes they have wallet features but they are created for trading cryptocurrency not storing them. This little mistake which investors make is why many of them continue to fall victims of these hacks. Bybits hack last year came as a shock and so far, almost all reputable exchanges we know of has been targeted and hack, this simply tells us that their security system is unsafe and not because they don't make security their priority, but because it's easier to find vulnerabilities in a public system than those meant to be self custody..

[Felicity_Tide]

Over the years, many investors have shifted from being their own bank to letting centralized exchanges or systems help them control their funds.

That's because they feel handling their responsibilities over to others makes those people accountable to their call, but not knowing that things can also easily goes south, and still leave them to suffer the loss for as long as they can't imagine. I think those who suffered the Mt.Gox crisis had an experience with this considering the number of years it took for the refunding process to start, and I doubt if they've completely refunded every single customer Involved. Thinking you can hold these exchanges accountable might eventually be a joke, especially when you're forced to wait for years, while they perform recovery that might eventually not even happen.

Why You Must Be Your Own Bank

Because your finance is your responsibility.
We've been taught that valuables are meant to be kept in bank or in a third party institution that offers security, but in a world of digital currency, I don't think such narratives should apply imo. Well, everyone should just do what suits them, and also ready to accept any future consequences, if there are any.

[KiaKia]

A real hack is when someone finds their way into a crypto exchange and drained their funds and the exchange do all they can to get their funds back and later pay their customers back for their losses.

Today it's a different story, you will hear about the stolen fund and they will keep pursuing the suspects forever, if you want some money to go missing without anyone coming for you, pretend like someone stole the money and start chasing air.

I believe this is what is happening with most exchange hacks, they are not always real hacks but a planned one by the people working for the exchange or even the exchange owners, think about it very well you will see how this is making sense.

[hd49728]

Bybits hack last year came as a shock and so far, almost all reputable exchanges we know of has been targeted and hack, this simply tells us that their security system is unsafe and not because they don't make security their priority, but because it's easier to find vulnerabilities in a public system than those meant to be self custody..

It can be a shock with many people, it can be also a shock with cryptocurrency market and prices of many cryptocurrencies can be affected negatively for some days too, but if you stored your cryptocurrencies in your non custodial wallets, you would be well and you're not affected by any hacks against exchanges, not against your non-custodial wallets.

If you stored your cryptocurrency fund on centralized exchanges, Bybit hack can be a big shock for you. It's not always lucky enough to receive compensation from exchanges with hacks as they can be brankrupted or they can use hack as their reason for either a scam exit or an exchange service closure.

Reminder: do not keep your money in online accounts.