How exactly is Exchange User Protection Fund used in the event of crypto hack

[BattleAxe1]

I am reading mixed messages regarding Bitget, Binance other CEX policy on the use of their set aside funds for user protection. If you got hacked and your crypto vanished from your portfolio, will they reimburse you or is it gone? Does that only apply to currencies like their natives exchange token like BGB or BNB?

From conversations on different forums after Bitget recently increased their Protection Fund Valuation status to $612 million this March, it makes it seem like if something happened and your assets were stolen, they would make it right because they've got funds to cover for compensation. Is that it?

Does anyone have a definitive answer on this?

[Ambatman]

It all depends on who's at fault. If the hack comes from your end then they have no reason to compensate you but if it's from their end, that's the essence of the set aside fund as we were told. Like in the case of FTX, if something that big occurs and customer funds are lost. The exchange would compensate user some or all their funds depending on the situation and the money set aside for this eventualities.
Don't really put all your hope on that though, Yes they agreed that it's for compensation in cases of emergency but we can't really take their word for it. The best is to be cautious in your end and mind the amount you keep on a centralized exchange.

[Findingnemo]

If exchange's hot wallet hacked and drained by hackers then exchanges may compensate the lost funds if they have enough in their reserves but we never know they have enough to compensate all and even if they have it will take time to make refunds. And only Binance able to do it successfully while all other hacks end the users to hear the loss so don't get delusional with such policies, it's important to move your funds away to your custody to ensure better security.

[BattleAxe1]

It all depends on who's at fault. If the hack comes from your end then they have no reason to compensate you but if it's from their end, that's the essence of the set aside fund as we were told. Like in the case of FTX, if something that big occurs and customer funds are lost. The exchange would compensate user some or all their funds depending on the situation and the money set aside for this eventualities.
Don't really put all your hope on that though, Yes they agreed that it's for compensation in cases of emergency but we can't really take their word for it. The best is to be cautious in your end and mind the amount you keep on a centralized exchange.

Oh yeah, that's it! The best is to be cautious and mind the amount of fund left on exchanges. Although looking at some of those policies and the amount displayed as protection funds, it gives a kind of assurance or some form of peace of mind using those CEX with such provisions.

Sincerely, I never want to experience an event that would demand their use of that set aside funds to compensate me. I wish for a safer and friendly crypto ecosystem.

[joniboini]

Although looking at some of those policies and the amount displayed as protection funds, it gives a kind of assurance or some form of peace of mind using those CEX with such provisions.

But can you verify that the numbers they show are correct though? What if they meant that valuation depends on various things which in the worst-case scenario brings the value down and won't cover everyone in case some accidents happen? I believe it is wiser if you use an exchange as an exchange, by withdrawing funds you don't use for trading as quickly as possible regardless of their insurance policy. Personally, I always do this and assume that all my funds will be gone when a hack happens so I'm always cautious about sending money that I can't afford to lose.

[Stompix]

If you got hacked and your crypto vanished from your portfolio, will they reimburse you or is it gone?

No, exchanges will always blame you for any hack happening on a single personal account.
So you get hacked, it's your fault, that's the end of the story!

Users who have their accounts compromised or assets stolen or lost due to events not attributable to their own actions or trading behavior may make a claim through the Bitget Protection Fund.

The user protection fund is for when the exchange itself gets hacked and your coins are gone, which of course will not be enough to compensate all users, especially if the hackers steal the protection fund coins too. 

[MCcabe Rory]

Although looking at some of those policies and the amount displayed as protection funds, it gives a kind of assurance or some form of peace of mind using those CEX with such provisions.

But can you verify that the numbers they show are correct though? What if they meant that valuation depends on various things which in the worst-case scenario brings the value down and won't cover everyone in case some accidents happen? I believe it is wiser if you use an exchange as an exchange, by withdrawing funds you don't use for trading as quickly as possible regardless of their insurance policy. Personally, I always do this and assume that all my funds will be gone when a hack happens so I'm always cautious about sending money that I can't afford to lose.

For some Yes. 👌

[Stompix]

For some Yes. 👌

So just because somebody typed some numbers on a press release you trust them?
https://beincrypto.com/proof-of-reserves-isnt-good-enough-says-industry/

I wouldn't trust one of those exchanges and their so called proofs, not when they have been all caught moving coins before the audits by "mistake".
Then there is the third party that was supposed to audit those and what a surprise;

https://www.coindesk.com/business/2022/12/19/why-auditors-arent-working-with-most-crypto-exchanges/
Auditing firm Mazars, which had published a proof of reserves report for Binance and other exchanges, on Friday cut ties with clients in the crypto industry.

After taking the job Mazars dropped Binance from their list of clients and none of the top 4 companies wants to work with crypto exchanges anymore, so it's pretty much telling the story of what they found out when doing those audits.

[Z-tight]

If you got hacked and your crypto vanished from your portfolio, will they reimburse you or is it gone? Does that only apply to currencies like their natives exchange token like BGB or BNB?

It is gone. If you lose your funds stored on any centralized exchange or even coins stored in your self custody, there is no way to recover it.

From conversations on different forums after Bitget recently increased their Protection Fund Valuation status to $612 million this March, it makes it seem like if something happened and your assets were stolen, they would make it right because they've got funds to cover for compensation. Is that it?

If the exchange itself gets hacked, you may or may not receive some part of your money back, it would take so many years of waiting, and in the end you may not get anything. There are a lot of crypto services that have collapsed for years now, and their customers are still waiting to see if they will get something back. I don't know if you are looking for an excuse to store your funds in a centralized exchange, if you are, then i can tell you for free that you shouldn't do it, because not your keys, not your coins.

[Charles-Tim]

I am reading mixed messages regarding Bitget, Binance other CEX policy on the use of their set aside funds for user protection. If you got hacked and your crypto vanished from your portfolio, will they reimburse you or is it gone? Does that only apply to currencies like their natives exchange token like BGB or BNB?

The exchanges are not going to pay you anything, the coin is gone. The reason they have the so called SAFU or something is because if the exchange is hacked and not if only one person is hacked. This would be irrespective of the coin, be it exchange token or not.

From conversations on different forums after Bitget recently increased their Protection Fund Valuation status to $612 million this March, it makes it seem like if something happened and your assets were stolen, they would make it right because they've got funds to cover for compensation. Is that it?

It will only be a compensation is my guess. It is possible that no one will be paid in full.

I will advice you not to trust any of the exchanges also. Do not hold your coins on exchanges. Use noncustodial wallet for it.

[Stompix]

It will only be a compensation is my guess. It is possible that no one will be paid in full.

No exchange would be able to guarantee all the user funds, imagine that for every penny somebody deposits the exchange will have to come with one penny from somewhere and just lock it in some reserve funds. What happens when somebody deposits 100 BTC, from where will they get another 100 BTC immediately to guarantee it?

Nobody has the money for a FDIC-style insurance, and they all know, what they try is just a publicity stunt.

[Sim_card]

If you leave your coins in an exchange and the exchange of your account gets hacked, sorry mate  your funds are lost and there is nothing you can do about it. The SAFU funds that we hear about are all digits and not real funds, because there is no prove. This is why it is useless to keep your idle funds in an exchange. It is get lost, you are on your own, because how will you see them and hold them responsible for the lost of your funds. Those exchanges are business people and are only concerned about themselves and don't give a shit about you, but your funds.

[Charles-Tim]

Nobody has the money for a FDIC-style insurance, and they all know, what they try is just a publicity stunt.

Even I have not seen this fund used to settle exchange users before. Maybe if something like that happened I mean the exchange hacked with massive coin lost, the exchange may become telling stories which it users will not like at all. There is nothing much special on exchanges than to exchange your coins or buy coins and move the coins out of the exchange into a noncustodial wallet which is fully controlled by there exchange user. Although, I know you know this.

[Zed0X]

~ Like in the case of FTX, if something that big occurs and customer funds are lost. The exchange would compensate user some or all their funds depending on the situation and the money set aside for this eventualities.

What particular FTX case? If you're talking about the bankruptcy, then that's a different situation. There is an existing law that covers reimbursements to stakeholders. The refunds would come from liquid assets (includes those reserved for Exchange User Protection) and the proceeds from sale of non-liquid assets.

[dkbit98]

You should never trust any centralized exchanges and you should not keep coins there long term.
It is fine if you are using exchanges for trading and keep some coins there, but be ready to lose those coins in case of hacking happens.
Exchanges can't do anything special to protect you coins, in some cases they could refund coins but from current examples you would have to wait for years to receive them.
Don't wait for others to protect your coins when you can protect them yourself in good non-custodial wallets.