USDT Frozen After the Binance Hack: Procedures for Release

This article explains, for OTC and P2P traders whose USDT received in ordinary transactions was frozen after the Binance hack, the release procedures that depend on who imposed the freeze, the materials needed to show good faith, and how to prepare for contact from investigators.

1. Timeline of the Binance Hack

The hack occurred at around 20:05 UTC on October 29 (early morning of October 30, Korea time), and Binance announced it on October 30. According to the announcement, approximately USD 6.3 billion was withdrawn without authorization from several hot wallets over about 20 minutes.

Binance stated that its initial investigation indicated that a compromised engineer's laptop had been used to access an internal withdrawal service, and that it was investigating additional points of compromise. It also said that user balances would not be reduced and that losses would be covered by its user protection fund and company funds.

Restoring Binance users' balances and the position of third parties along the path of the hacked funds are separate matters. Even if Binance covers the losses, tracing and freezing of the stolen assets may continue.

The scale and cause of the losses may change as the investigation proceeds, so information should be checked against official announcements.

Binance — Security Incident Update (October 30, 2026)

2. Movement of Hacked Funds and Links to Third-Party Transactions

According to media reports, Tether froze more than 1.5 billion USDT believed to be connected to the hack, and Circle also froze USDC. Blockchain analytics firms are tracing the paths along which the stolen assets were split and moved across multiple wallets.

During tracing, wallets through which hacked funds passed, and addresses connected to them directly or through several hops, may be flagged as high-risk addresses. Even if a counterparty did not know the source of the funds, restrictions may first be placed on its wallet or exchange account.

Commentators have noted that a freeze does not mean the funds will be returned to victims immediately, and that recovery depends on cooperation among issuers, exchanges, and law enforcement.

CoinDesk — Report of October 30, 2026

3. Issuer Freezes and Exchange Deposit and Withdrawal Restrictions

Tether's terms of service provide that it may freeze or transfer USDT held at specific addresses in accordance with laws or government actions. An issuer freeze may be imposed at the request of law enforcement or at the issuer's own discretion, and the issuer decides on release case by case.

The terms of Korean exchanges also allow them to restrict deposits and withdrawals if there are reasonable grounds to suspect a connection to hacking or fraud. In that case, first check the explanation procedure required by the exchange and the deadline for submitting materials.

An issuer freeze may be difficult to lift through an individual's release request alone, so the circumstances of the freeze should be confirmed first.

Organize the frozen address, network, time of the freeze, and related TXIDs, and keep exchange notices and issuer emails in their original form. Never submit private keys or recovery phrases in any explanation procedure.

Tether — Terms of Service

4. Materials Showing the Circumstances at the Time of the Transaction

Article 4 of Korea's Act on Regulation and Punishment of Criminal Proceeds Concealment punishes a person who receives property knowing the circumstances indicating that it is criminal proceeds. The proviso to the same article excludes from punishment a person who receives the property in performance of a contract for consideration without knowing those circumstances.

A hack that occurred overseas may also be reviewed under this Act. Article 2 of the Act provides that an act committed overseas, even by a foreign national, is included in the specified crimes if it would constitute a serious crime had it been committed in Korea and is also a crime under the laws of the place where it was committed. However, whether the property generated by that act constitutes criminal proceeds subject to the offense of receipt depends on the interpretation of the definitions and the individual circumstances.

For this reason, the key issue is whether there were circumstances at the time of the transaction that should have raised suspicion about the source of the funds.

Link the date and time, quantity, counterparty information and identity verification records, KRW deposit records, and TXID for each transaction. Also preserve the transaction price compared with the market price and communications with the counterparty.

A price far below the market rate, or a large transaction in which the counterparty avoids explaining the source of funds, may be viewed as a suspicious circumstance.

Deleting communications or records that appear unfavorable may increase suspicion. Preserve materials in their original state without editing them.

Korea Law Information Center — Act on Regulation and Punishment of Criminal Proceeds Concealment Articles 2 and 4 (Korean)

5. Preparing for Contact from Investigators

If your assets were part of the path of hacked funds, investigators may contact you to confirm the flow of funds. In that case, first confirm whether you are being called as a witness and which transactions are at issue.

Also confirm which agency has contacted you. Korea's Act on the Organization and Operation of the Serious Crimes Investigation Agency, effective October 2, 2026, designates fraud under the Criminal Act, violations of the Act on the Protection of Virtual Asset Users, and the related receipt of criminal proceeds as crimes subject to investigation by the Serious Crimes Investigation Agency. Unreported business under the Act on Reporting and Using Specified Financial Transaction Information is not on this list.

Korea Law Information Center — Act on the Organization and Operation of the Serious Crimes Investigation Agency Article 2 (Korean)

If you have repeatedly engaged in OTC trading, allegations of operating an unreported virtual asset business may be reviewed separately from the hacked funds issue. Organize the size and method of your transactions and whether you received fees.

In fact, on October 30, the Digital Asset eXchange Alliance (DAXA) referred three unreported virtual asset service providers to investigators, and the Korea Financial Intelligence Unit (KoFIU) requested that domestic access to two of them be blocked. A cumulative total of 47 businesses have been reported to investigators for unreported operations.

Guessing when explaining transactions you do not remember may lead to factual inconsistencies, so make statements only after checking the records.

News1 — Report of October 30, 2026 (Korean)

6. Bank Account Freezes and Counterparty Checks

If the KRW received in exchange for selling USDT is linked to the proceeds of another crime, a freeze on your bank account may become a separate issue. Hacked funds issues and bank account freezes have different legal bases and release procedures, so they should be addressed separately.

Re-check the wallets and deposit accounts of recent counterparties, and it is advisable to decline, for the time being, offers of large sales whose source is difficult to verify. Companies should document their transaction approval criteria and counterparty verification procedures.

7. Frequently Asked Questions (FAQ)

Q1. Does the exchange covering its losses mean the freeze will be lifted?

Binance covering its losses and the release of frozen third-party wallets are separate matters. Freezes are maintained or lifted based on decisions by the issuer and law enforcement, so the procedure for each party that imposed a freeze should be checked separately.

Q2. Can I be punished if I did not know the funds were criminal proceeds?

If you did not know the circumstances indicating that the funds were criminal proceeds, the offense of receipt may not be established. The law excludes from punishment a person who receives property in performance of a contract for consideration without knowing those circumstances. However, knowledge is determined based on objective circumstances such as the transaction price and method and whether the counterparty was verified, so you must be able to explain it with records.

Q3. Can frozen assets be transferred?

If the issuer freezes an address, USDT at that address cannot be transferred. Hastily moving assets remaining in other wallets may increase suspicion, so it is advisable to review the situation before moving them.

Overall Review of Release Procedures and Showing Good Faith

USDT linked to the Binance hack requires preparing release procedures for each party that imposed the freeze, an explanation of good faith at the time of the transaction, and readiness for contact from investigators together. Even before assets are frozen or you are contacted, it is advisable to organize recent transaction records in their original state.

Related Advisory Services of DECENT Law Firm

DECENT Law Firm reviews the circumstances of freezes and the transaction structure of digital assets linked to hacked funds and assists with explanations to issuers and exchanges, responses to contact from investigators, and bank account freezes.