A new report from Wu Blockchain suggests that the October 11 crypto market crash may not have been a random sell-off, but a coordinated exploit that took advantage of a vulnerability in Binance’s Unified Account margin system.
Summary
- Wu Blockchain says Oct 11 crash may be premeditated exploit on Binance margin.
- USDE, wBETH, BnSOL depegged to $0.65, $0.20, $0.13 during extreme volatility.
- Binance system let yield coins serve as collateral, amplifying liquidations.
According to journalist Wu Blockchain, attackers appear to have manipulated certain collateral assets on Binance — causing them to crash in value — which then triggered mass liquidations across the exchange.
The attack targeted USDE, wBETH, and BnSOL, which saw extreme depegging, with USDE falling to $0.65, wBETH to $0.20, and BnSOL to $0.13.
The timing coincided precisely with a window between Binance’s October 6 announcement of an oracle price adjustment and its scheduled implementation on October 14. This provided attackers with a clear opportunity.
The 24-hour spot trading volume for the three affected assets reached $3.5-4 billion on Binance, with estimated realized losses between $500 million and $1 billion that the exchange may need to cover.
Unified margin design amplified cascade liquidations
The vulnerability stemmed from Binance allowing PoS derivatives and yield-bearing stablecoins as unified margin collateral, with liquidation prices derived from Binance’s own spot order book rather than hard-pegged values.
While BUSD remained hard-pegged and Aave oracle data for USDE stayed at 1:1 on-chain, preventing large-scale liquidations elsewhere, Binance’s internal pricing mechanism created isolated vulnerability.
As Bitcoin (BTC) and altcoins fell sharply, derivatives traders faced mounting losses. For coin-margined positions, declining coin prices combined with severe collateral depegging further eroded margin values.
Market makers using these assets as margin were forced to close all positions and liquidate holdings, amplifying the downward pressure.
USDE faced additional selling from Binance’s 12% yield program, which encouraged large stablecoin holders to engage in recursive borrowing, magnifying damage from the targeted attack.
USDE spot prices on Binance plunged far below levels on other centralized exchanges, most of which stayed above $0.90.
Similarly, some altcoin local lows on Binance fell significantly below other exchanges, likely linked to forced liquidations by major market makers.
Structural risks echo LUNA-UST collapse
Investor Mindaoyang noted parallels between this crash and the LUNA collapse. Both incidents occurred when major exchanges accepted “non-fiat” stablecoins as high-collateral assets.
The most dangerous combination involves market-fed pricing with high collateral ratios, especially when centralized exchanges have low arbitrage efficiency.
Wu Blockchain’s analysis suggested that liquidation oracles for PoS-based native assets should maintain hard floor prices rather than relying on spot order book pricing.
Tom Lee of BitMine noted that the market pullback may have been overdue after a 36% gain since April. The VIX fear index surged 29%, marking the 51st most significant single-day move in history and ranking among the top 1% of extreme events.
