The Bybit hack from this morning is already seeing a massive fallout, with conflicting narratives surrounding the security breach. The exchange is seeing extreme liquidity demand for withdrawals while Pi Network surges nearly 10%.

Due to high demand, users are experiencing difficulty withdrawing their funds, but CEO Ben Zhou has assured them that withdrawals will remain open.

Bybit Hack Leaves Crypto in Chaos

Bybit, one of the world’s leading crypto exchanges, is in a tumultuous moment right now. This morning, it suffered a $1.5 billion hack, which is already being called the “biggest security breach in crypto history.”

The whole community is scrambling, and nobody seems to have the full picture yet. However, Safe.eth, the multisig wallet that manages Bybit’s Ethereum cold wallet, denies any breach on their end.

“Safe’s security team is working closely with Bybit on an ongoing investigation. We have not found evidence that the official Safe frontend was compromised. However, out of caution, Safe {Wallet} is temporarily pausing certain functionalities. User security is our top priority, and we’ll provide more updates soon,” the firm claimed.

Essentially, Safe uses a smart contract-based wallet system to manage its Ethereum cold storage. If its front-end wasn’t compromised, this means authorized Bybit users had to sign off on the mechanism to enable the hack.

If the attackers managed to fool Bybit authorities into signing an exploit, they could rewrite the code and begin draining funds.

“Bybit signers had malware on their endpoints. They were trying to initiate legit transactions, but the malware was acting like a man-in-the-middle attack, they were connecting their hardware wallet to sign,” security firm Cyvers told BeInCrypto.

Because Bybit staff may have been the weak point in this hack, this has only added to the chaos. CZ, the former CEO of Binance, urged Bybit to halt all withdrawals, but this didn’t happen.

Zhou assured users that the exchange has enough funds to remain solvent, and Arkham Intelligence identified a transfer proving at least $500 million in reserves. Zhou even claims that Bybit will take loans to ensure all withdrawal requests are fulfilled.

“Not an easy situation to deal with. Might suggest to halt all withdrawals for a bit as a standard security precaution. Will provide any assistance if needed. Good luck,” CZ wrote on X (formerly Twitter).

Pi Network Turned Bullish After Bybit’s Woes

There is absolutely zero firm evidence, but some in the crypto community believe that Pi Network enthusiasts were somehow responsible.

Pi Network’s mainnet launched yesterday with the biggest airdrop in crypto history. While several exchanges listed the token on day one, Ben Zhou firmly denounced it as a scam yesterday. Bybit has been consistently reluctant to list the token.

As a result, there has been a strange positive reaction to the PI market after the Bybit hack. The token’s price surged nearly 10%.

In short, everything is in chaos. In the latest livestream, Zhou discussed some of Bybit’s next steps after the hack. He claimed that withdrawals are still open, but traffic is 100x higher than usual, so users may not be able to access services smoothly.

“We’ve experienced massive withdrawals since the $1.4 billion ETH hack. Even if we are experiencing a bank run, it’s not an issue. We have enough tokens to give to the clients” Zhou said.

The firm will not try to buy back lost assets immediately, relying on bridge loans, but remains adamant that it can keep its users whole.

The SEC is dropping its lawsuit against Coinbase, according to an announcement from CEO Brian Armstrong. However, the Commission’s lawsuit against Ripple remains open for now, raising more questions.

Both lawsuits deal with certain cryptoassets’ status as securities, not commodities. For Coinbase, this interpretation would hamper operations, but it could prove fatal for the XRP issuer.

SEC Drops the Coinbase Suit

Brian Armstrong, the founder and CEO of Coinbase, is having a good day today. Recently, the company has been advocating for better US crypto regulation, and it achieved a major milestone today. Armstrong announced that the SEC was dropping its 2023 lawsuit.

“Great news! After years of litigation, millions of your taxpayer dollars spent, and irreparable harm done to the country, we reached an agreement with SEC staff to dismiss their litigation against Coinbase. Once approved by the Commission (which we’re told to expect next week) this would be a full dismissal, with $0 in fines paid and zero changes to our business,” he said.

Armstrong called this development “hugely vindicating,” claiming it was a real challenge to resist the Commission’s “mafia tactics” under the previous leadership.

He also said that this suit is a groundbreaking development for the future of crypto in the US because it would’ve substantially hindered exchanges’ ability to do business nationwide. For Coinbase, the SEC legal battle appears over.

However, the SEC has another active crypto lawsuit – its fight against Ripple. The two suits have major similarities, both hinging upon the notion that certain cryptoassets are securities. This interpretation opens crypto-related businesses to much stricter regulation.

How Will the Coinbase Settlement Impact the XRP Lawsuit?

For Coinbase, the issue is that the SEC insisted upon a lack of clarity with these classifications, essentially claiming that it could demand the exchange delist any token at a whim. In the Ripple case, however, it alleged that the firm was forbidden from raising funds through XRP token sales without registration.

In both instances, the SEC leaned on a lack of clear standards for crypto.

Even before today’s announcement, the SEC had already signaled it would drop charges against Coinbase, but the process has been murkier for Ripple. The Commission recently removed the XRP lawsuit from its website, and may be waiting for a few broader changes to dismiss it outright.

Ultimately, however, the Ripple case may be more complicated. The SEC alleged that Coinbase was hosting certain unlawful assets, and complying would severely impact the business model for all exchanges.

In the latter suit, it claimed that selling XRP was itself a securities violation, which would severely impact a great number of token projects.

The SEC is already taking a few measures to lay the groundwork for a broader policy realignment. Commissioner Peirce claimed that it wants to formally remove some tokens’ security status.

Also, the Commission is looking to reduce its crypto enforcement activities generally. Overall, the Coinbase case does provide some optimism for the XRP community.