Exchange Hack: What Happens to Active Trades?

[Dr.Bitcoin_Strange]

I have not had such experience and hope not to but the too many exchange hacks that is happening lately just put this thought in my head. Assuming a trader is on a perpetual position and then the exchange got breached by hackers, which probably lead the exchange to suspend trading at the moment, making it impossible for the trader to close or adjust their position, who bears the lose if the trader lost that trade due to that incident? In a case too where the exchange has to cancel the running orders of traders which could also cause lose, does the exchange compensate the trader in any way?.

[Ruttoshi]

Since everything is on pause, your trade will also be on pause till the exchange resumes trading again, your trade continues and if the price is already against your position at that time of resuming, the exchange can roll back a fair price though, this varies from exchange to exchange.

However, if the exchange don't have SAFU, there will be no reimbursement and your funds is gone.

[7juju]

I haven’t been in such situations before, but I kind of think that if an exchange is suspending trade due to breach in their system, all active trades will be automatically cancelled by their system. The exchange is aware that there will definitely be and active trades, if they let them remain open and the traders are unable to take action due to the suspension of trading activities, that they will lose money. At that emergency moment, they will have to cancel all trades internally. Any loss that is suffered because of that, the exchange will bear the full cost.

[Oshosondy]

The exchange will have the losses and not the traders. But know that you may not be able to do anything on the exchange, but the exchange can still know those that open position and the amount of money they are winning or losing when they take down their exchange services.

But if it happened like this and it is getting more than minutes to hours and the exchange is not back online, just know that it is possible the exchange may not be able to pay users and they may shot down operation.

The best exchanges can do is to disable withdrawal. When it gets to other operations not functioning on the exchange, know that traders may lose their funds on the exchange.

[Aliciaworld]

I have not had such experience and hope not to but the too many exchange hacks that is happening lately just put this thought in my head. Assuming a trader is on a perpetual position and then the exchange got breached by hackers, which probably lead the exchange to suspend trading at the moment, making it impossible for the trader to close or adjust their position, who bears the lose if the trader lost that trade due to that incident? In a case too where the exchange has to cancel the running orders of traders which could also cause lose, does the exchange compensate the trader in any way?.

I think Bybit compensated customers for their losses and time water after they were hacked for over $1.6bn

[Pikiboy]

The only people to compensate are the people that are directly being affected while trading, let say as they were trading they loose all their money that was funded and has nothing left on their balance then the exchange would have to compensate those that are directly affected in one way or another
But, when trading and it happens that the exchange site is shutdown, all the activities going on in the exchange would automatically stop till the site is fully back again.

[Rruchi man]

But if it happened like this and it is getting more than minutes to hours and the exchange is not back online, just know that it is possible the exchange may not be able to pay users and they may shot down operation.

If the exchange suffers a really significant loss, I don't think they will be very willing to pay users who had active trades on during the security breach. It will be a loss that everyone will have to bear.

High chances that it can be more common with small exchanges.

[Donneski]

Before you sign in to an exchange, they give you their terms and conditions to read and agree to it and this particular situation one if the reasons why you should understand the terms and conditions before clicking "agree." If a security breach that forces an exchange to shutdown operations happens when a trader is on a position, the trader is most likely going to suffer the loss. They didn't shut down because of your ongoing trading, they did so to protect their platform, they'll most likely issue a public apology to customers for all the inconveniences when they're back online but i doubt that they'll take responsibility for the losses. If it even happens with all these small exchanges, they might not return to avoid legal actions and complaints

[Charles-Tim]

Before you sign in to an exchange, they give you their terms and conditions to read and agree to it and this particular situation one if the reasons why you should understand the terms and conditions before clicking "agree." If a security breach that forces an exchange to shutdown operations happens when a trader is on a position, the trader is most likely going to suffer the loss. They didn't shut down because of your ongoing trading, they did so to protect their platform, they'll most likely issue a public apology to customers for all the inconveniences when they're back online but i doubt that they'll take responsibility for the losses. If it even happens with all these small exchanges, they might not return to avoid legal actions and complaints

So is it on any exchanges terms of service that if the exchange is hacked, customers will have to pay for the loss or any loss that the exchange has, the customers will be the one that will have to pay for the loss? Nobody will want to register on such exchanges. It is better people use exchanges that will not close all their users trading positions because of such an excuse. All the exchanges that I know that were hacked recently did not do such a thing.

[Donneski]

Before you sign in to an exchange, they give you their terms and conditions to read and agree to it and this particular situation one if the reasons why you should understand the terms and conditions before clicking "agree." If a security breach that forces an exchange to shutdown operations happens when a trader is on a position, the trader is most likely going to suffer the loss. They didn't shut down because of your ongoing trading, they did so to protect their platform, they'll most likely issue a public apology to customers for all the inconveniences when they're back online but i doubt that they'll take responsibility for the losses. If it even happens with all these small exchanges, they might not return to avoid legal actions and complaints

So is it on any exchanges terms of service that if the exchange is hacked, customers will have to pay for the loss or any loss that the exchange has, the customers will be the one that will have to pay for the loss? Nobody will want to register on such exchanges. It is better people use exchanges that will not close all their users trading positions because of such an excuse. All the exchanges that I know that were hacked recently did not do such a thing.

They might not necessarily spell it out that if a hack happens and as result forces exchange shutdown, every loss will be incurred by customers because that alone will discourage people from using them but their are short legal terms that can protect them from taking responsibility of the losses that can be added in the terms and conditions.

Away from my opinion, in such situation where traders lose money after an attack that forces a shutdown, who'll take the full responsibility? I want to learn from a more experienced brain in the crypto world please.

[Big Dirams]

Before you sign in to an exchange, they give you their terms and conditions to read and agree to it and this particular situation one if the reasons why you should understand the terms and conditions before clicking "agree." If a security breach that forces an exchange to shutdown operations happens when a trader is on a position, the trader is most likely going to suffer the loss. They didn't shut down because of your ongoing trading, they did so to protect their platform, they'll most likely issue a public apology to customers for all the inconveniences when they're back online but i doubt that they'll take responsibility for the losses. If it even happens with all these small exchanges, they might not return to avoid legal actions and complaints

So is it on any exchanges terms of service that if the exchange is hacked, customers will have to pay for the loss or any loss that the exchange has, the customers will be the one that will have to pay for the loss? Nobody will want to register on such exchanges. It is better people use exchanges that will not close all their users trading positions because of such an excuse. All the exchanges that I know that were hacked recently did not do such a thing.

They might not necessarily spell it out that if a hack happens and as result forces exchange shutdown, every loss will be incurred by customers because that alone will discourage people from using them but their are short legal terms that can protect them from taking responsibility of the losses that can be added in the terms and conditions.

Away from my opinion, in such situation where traders lose money after an attack that forces a shutdown, who'll take the full responsibility? I want to learn from a more experienced brain in the crypto world please.

An individual don’t have the power to pay off the exchanges if we are to be honest right here and however the exchanges are meant to take responsibility of all this because it is there business and not ours and practically we are just customers. Even before building the exchange they are aware of situations like this where hacks go on and scamming happens so they know one day people will get to them and that why it advisable to always consider checking if an exchange got insurance in case of situation like this.

And about your question, In situation where traders losses their money after an attack which forces shutdown then the exchanges are meant to take the full responsibilities.

[coinlary]

Both sides.

The exchange will only compensate  at the end even if they are going to shut down unless they are leaving it all for the court to rule it in their favour . This doesn't mean it will cover the entire loss if they pay, but it surely does do some relief than nothing with additional loss.  

There should be something about that in their TOS but , you would expect them to pay if it deserves it after an investigation  and that's if the trades are trully suspended.

In the recent hacks, did any of that happened ? I couldn't find that much news regarding it . Anyone??

[Charles-Tim]

Away from my opinion, in such situation where traders lose money after an attack that forces a shutdown, who'll take the full responsibility?

All I know is that if there is any possibility that the exchange customers can be compensated, that would be what will happen. In a good country, the government will step in. But in a country like where I am from, I do not trust the government. You can see FTX, MT. Gox and some in the past that their users were later paid after many years, but the government still tried. But it it happened that nothing can be done, the customers will have to suffer the loss.

[Perfectbaby]

If a hack happened on exchange the people who are affected get back their funds and exchange do take snapchat or the affected victims and pay back to them as an airdrop to their account with their respective stolen assets. With this acts they tends to build their reputation more stronger. If we can take an instance on what happened to Binance exchange you will see that out of the $6.3B stolen from the exchange about $3b was freezed and around 3b that they would be paying back. As we know Binance is the number one exchange that is mostly rated for its transparency.

[perfect999]

As far as I know, an exchange doesn't stop trading operations or close already opened trading positions in case of a hack or exploit, except for specific trading types, such as P2P. Spot, futures and perpetual and all other types of trading activities continue to work I believe. They stop withdrawals, obviously. The reason why I'm saying this is because a hack happens within the financial side, like cold wallets and wallets where funds are kept, but what see on a centralized exchange is not specifically a live version of their cold wallet, it's all data that can continue the same way without any interruption for as long as they find a solution to the problem, because withdrawals are blocked, so no one can make a withdrawal, so even if someone makes money, they will have to wait until the withdrawals are open again.

Now, if I had $100 in my account, I opened a futures trade with it, and at the same time, the hack happened, they stopped withdrawals, but my trade continues, and I make $500 in profits, and now I have $600 in my account. Since I cannot withdraw the funds, they will just be shown to me, and once they gain control of the situation, either recover or reimburse the funds that were stolen, and reopen withdrawals, I can then make a withdrawal along with my profits.

I could be wrong though, but I think this is how things work. If I remember correctly, Binance didn't stop people from making trades when the withdrawals were closed.

[taufik123]

Usually, the active transactions will be immediately frozen, suspended, or automatically canceled by the exchange system to prevent greater losses when a hack occurs.

If the result of the hacking of the transaction is executed and gives a loss or victory,
then the transaction will be rolled back to its original state when the transaction was active, so this will not interfere and harm the user.

and for the policy of cancellation of active transactions and compensation will be entirely dependent on the reputation, capital, and regulation of each exchange.

[snowpega]

I have not had such experience and hope not to but the too many exchange hacks that is happening lately just put this thought in my head. Assuming a trader is on a perpetual position and then the exchange got breached by hackers, which probably lead the exchange to suspend trading at the moment, making it impossible for the trader to close or adjust their position, who bears the lose if the trader lost that trade due to that incident? In a case too where the exchange has to cancel the running orders of traders which could also cause lose, does the exchange compensate the trader in any way?.

Honestly, I am not a very active trader, and whenever i do trade i do it only spot section.
I have never traded any crypto in future section since the day i am in the crypto space due to some personal concerns. But the point you raised is very concerning, and I have never thought about that. But it looks like as crypto space users we should need to have good researh on this matter as well. And, according to the best information, three exchanges were hacked in the same year that were managing big users funds. First was Bybit, I think, then binance and a day or two ago, MercadoBitcoin was the third one according to my best information and around $46M worth of assets were hacked on this exchange too.

There should be compensation if any trader is affected by such an incident due to the CEX platforms, in my point of view. But i was just wondering, one is safe in spot section as compare to future section and closing order mean losing all funds if the trade goes against your favor. This is a very frightening matter. What do you think?

[Zaguru12]

If a hack happened on exchange the people who are affected get back their funds and exchange do take snapchat or the affected victims and pay back to them as an airdrop to their account with their respective stolen assets. With this acts they tends to build their reputation more stronger. If we can take an instance on what happened to Binance exchange you will see that out of the $6.3B stolen from the exchange about $3b was freezed and around 3b that they would be paying back. As we know Binance is the number one exchange that is mostly rated for its transparency.

I think you do not understand the question that the OP is asking, first of all I think you’re writing about the assets that are actually store on the exchange like in spot yes, the exchange will have a snapshot of the data and they will definitely give the customers their assets back.

The actual question is actually about traders who have active trade going on and the exchange decides to suspend everything? The question is would the exchange reward any trader they forcefully closes their trade if they are in loss? I don’t think so because I have seen periods of very highly market volatility due to a high impact news the exchange force closes the trades and I haven’t experienced compensations for those losses.

One thing we need to distinguish about this hacks is that it’s usually the non custodial wallet of the exchanges that are hacked and not the exchange because usually there is no money on the exchange rather just the users information.

[CryptopreneurBrainboss]

In a case too where the exchange has to cancel the running orders of traders which could also cause lose, does the exchange compensate the trader in any way?.

I believe this can turn out with different experiences from different exchanges and it all depends on the terms and conditions of the exchange because a big exchange can handle compensating their customers while a smaller exchange can just close/cancel every active trade if their platform was hacked. Unfountaly I don't have any personal experience to talk from but fortunately for me to not have experience this because I haven't been in this situation when a hack happens. But I think the ideal thing to do is close all trades on that exchange because the exchange is forced to go under maintainance when these hacks happens and that means no activity on the platform so it just makes sense to shut everything down than leading the trade active and thinking of compensation  as it can be expensive and every customers just have to understand why this was done. Better to protect many traders from losing then few winning.

[BigTarget]

The question is would the exchange reward any trader they forcefully closes their trade if they are in loss? I don’t think so because I have seen periods of very highly market volatility due to a high impact news the exchange force closes the trades and I haven’t experienced compensations for those losses.

Damn, that was sad to hear. But care to share if what exchange was that? Or maybe all of the exchanges are like this? But I will say this is a unprofessional act. Before they start a business, they must be aware that cryptos are high in volatility or sensitive to news and other factors.

One thing we need to distinguish about this hacks is that it’s usually the non custodial wallet of the exchanges that are hacked and not the exchange because usually there is no money on the exchange rather just the users information.

You mean to say cold wallet. But I think exchanges are like online casinos too that also left some money online for immediate use. But imagine if the headline just be true and say this, there will be less panic or the reputation of the exchange are still protected. People will think that the problem is in the wallet and not the exchange though. As for the users information, I won't underestimate this and the hackers can also sell this to another company for a decent amount of money.